Portugal has agreed a €78bn bailout with the EU (European Union) and the IMF (International Monetary Fund) becoming the third country of the 17-member Eurozone to require sovereign debt assistance.

In a television address on Tuesday night, José Sócrates, the country’s caretaker prime minister, said the agreement set tough conditions but he signalled that the terms were more lenient that the packages that were agreed with Greece and Ireland.

Sócrates said that Portugal would be given more time to reach its budget deficit targets than had previously been expected.

The deficit will have to be reduced to 5.9% of GDP this year, 4.5% in 2012 and 3% in 2013.

Portugal had previously agreed to reduce the deficit to 4.6% this year, 3% in 2012 and 2% in 2013.

Portugal's 2010 deficit was 8.6% of GDP compared with its target of 7.3%. Eurostat, the EU’s statistics office had classified €2bn in costs related to the 2008 seizure of Banco Portugues de Negocios SA, as sovereign debt, and also costs related to  public transport were also reclassified.

Portugal’s public debt jumped to 93% of GDP in 2010 from 68% in 2007 and the national statistics office in March estimated public debt will reach 97.3% of GDP this year.

Portugal's annual growth over the past decade was about 0.7%.

Sócrates resigned as prime minister in March after failing to get austerity measures through parliament and a general election will be held on June 5.

The agreement will have to be endorsed by the main opposition parties.

The interest rate to be charged on the loans has not been announced.

The caretaker prime minister said the deal would not involve any cuts in public sector wages or changes to the minimum national wage, nor any forced public sector job cuts.

State-owned Caixa Geral de Depósitos will not have to be privatised and no special taxes on holiday bonuses are required. There will also be no change in the minimum retirement age.

Portugal was facing the prospect of having to raise €7bn by June 15 to cover bond maturities and the European Commission is looking to have approval of the package at the May 16-17 meeting of EU finance ministers. However, that may not be possible as Finland's new parliament, which has to approve the package, may not have convened by then.

Bloomberg reports that the parliament’s grand committee, which comprises party representatives, will decide what Finland’s stance on bailouts should be before the meeting of European Finance Ministers on May 16, two days before official coalition talks start, said Finance Minister Jyrki Katainen, who is leading government negotiations after his National Coalition Party won the most votes in the country’s April 17 election.

“It would be detrimental for Finland to block a bailout,” Katainen told reporters yesterday. “I’m going to defuse this impasse through talks with the parliamentary groups.”

Bloomberg also reports that a budget expert from Germany’s governing coalition and his counterpart from the biggest opposition party urged Portugal to consider selling some of its gold reserves to ease its debt problems, the Passauer Neue Presse reported.

The EU will provide about two-thirds of the total bailout funds, the remainder coming for the IMF.

The Associated Press reports that Portugal is already one of Western Europe's poorest countries, making further cuts unpalatable for many. Some 340,000 Portuguese are on the minimum monthly wage of €485 before tax, and 1.4m take home less than €600 a month.

Banco Espirito Santo Q1 Results: Ricardo Salgado, CEO of Portuguese bank, Banco Espirito Santo discussed a better than expected 49% drop Q1 in profits on Tuesday, as Portuguese banks are hit by a downgrade and the ongoing debt crisis. He added that unlike Spain where the rate of non-performing loans are picking up, in Portugal "non-performing loans are going up, but smoothly, at a much lower level than in Spain":