Portugal reached a €78 billion bailout deal with the EU and IMF late last night, an agreement that marks the euro zone’s third sovereign rescue after Ireland and Greece.
In a televised address from his official residence in Lisbon, caretaker prime minister José Sócrates said the pact with the EU Commission, the European Central and the IMF will protect the country’s interests.
Consultations with the country’s centre-right opposition leaders are still to follow, crucial given their lead in polls ahead of next month’s general election. However, officials close to the talks have expressed confidence the opposition is willing in principle to adhere to the main terms of the rescue.
This was a key requirement of the EU/IMF team as it wanted to avoid any repeat of its experience in Ireland when the newly-elected Government sought to renegotiate a deal agreed only months previously by its predecessor.
Euro zone finance ministers plan to sign off on the deal at their monthly meeting next Monday week in Brussels. This would leave time for the European Financial Stability Facility bailout fund to raise money for Portugal to meet a €4.9 billion bond redemption in mid-June, a repayment it could not make without the benefit of external aid.
Mr Sócrates, who for months resisted an external intervention in Portugal’s affairs, applied for aid last month after parliament rejected his latest austerity plan. Memories are still raw in Portugal of two previous IMF interventions in the 1970s and 1980s.
Fighting for his political life in the election, Mr Socrates said he had secured a “good agreement” with the country’s sponsors.
“Naturally there are no programmes of financial assistance that are not demanding and that do not imply a lot of work. That does not exist,” he said in his broadcast.
The loan programme will run until 2014, although Portugal will have bring its budget deficit within the EU’s 3 per cent limit a year earlier. The plan assumes the deficit will be 5.9 per cent of gross domestic product this year and 4.5 per cent in 2012.
High level European officials are turning their attention yet again to Greece amid rising doubt about its capacity to meet difficult financial targets under its rescue plan.
Tanaiste Eamon Gilmore today said the Portuguese bailout would work to Ireland's advantage by widening the crisis to a "more European issue" of economic recovery so that it was no longer concerned Ireland alone.
Asked about claims that the terms of the Portuguese deal were more generous than those applying to Ireland, Mr Gilmore said that the programme agreed for each county was different and depended on the circumstances applying in that country. Portugal was being asked to get its deficit down by 2013, he pointed out, whereas Ireland's deadline was 2015.
He said the Government was continuing to press the case for a better deal for Ireland, particularly through a reduced interest rate on the EU/IMF deal. Efforts to get other member states to support this stance were ongoing, said Mr Gilmore, who welcomed the support of the Dutch finance minister at the weekend for a lowering of the interest rate.
