Portugal pressed to accept Union bailout

Attacks against the euro persist, Berlin denies involvement

Photo: Pho­to: EPA Por­tu­guese Prime Min­is­ter Jose Socrates address­es a press con­fer­ence about IMF and eco­nom­ic pol­i­cies, at Sao Ben­to Pal­ace, in Lis­bon.

Pres­sure is mount­ing on Lis­bon to seek a bail­out from the EU and IMF, as Greece and Ire­land did. For sev­er­al months now, the coun­try has been under spec­u­la­tive attacks that it will be the next to default in the euro zone.

Pres­sure is mount­ing on Lis­bon to seek a bail­out from the EU and IMF, as Greece and Ire­land did. For sev­er­al months now, the coun­try has been under spec­u­la­tive attacks that it will be the next to default in the euro zone. Since July, econ­o­mists and ana­lysts' jaw­bon­ing exer­cis­es neg­a­tive pres­sure on its frail eco­nom­ic sta­bil­i­ty. Last week, the Por­tu­guese cab­i­net again denied yet anoth­er piece of infor­ma­tion released by the Ger­man mag­a­zine Spie­gel that Ber­lin and Par­is are strong-arm­ing the coun­try to seek finan­cial res­cue.
Prime Min­is­ter Jose Socrates once again stood for the nation's sol­ven­cy amid spec­u­la­tions that Por­tu­gal will be the next euro zone mem­ber to stretch out a hand for an EU bail­out. Last year's budg­et def­i­cit will be far below the fore­cast­ed 7.3% of GDP, he argued. He stat­ed his case point­ing that the coun­try does not have the kind of bank­ing prob­lems Ire­land has.
Ger­ma­ny does not put pres­sure on Por­tu­gal to accept EU aid, Ger­man Chan­cel­lor Angela Mer­kel stat­ed dur­ing a vis­it to Mal­ta ear­ly last week, add­ing that each nation decides on its own wheth­er it needs it or not. "Por­tu­gal has not request­ed help and we will not put pres­sure on Por­tu­gal to take such," she said at a joint press con­fer­ence with Mal­ta's Prime Min­is­ter Law­rence Gonzi.
The Euro­pe­an Com­mis­sion also announced it has no wor­ries relat­ed to Por­tu­gal's finan­cial health. "Such talks and not been held, nor planned," said Ama­deu Alta­faj, Spokes­man for EU Com­mis­sion­er on Eco­nom­ic Affairs Olli Rehn.
On Wednes­day, Por­tu­gal's suc­cess­ful bond auc­tion raised €1.25bn with strong demand and low yield. The auc­tion, the first in 2011, is regard­ed as a test of Por­tu­gal's sta­bil­i­ty on the mar­kets and eased the pres­sure on the indebt­ed nation to e cer­tain extent. The Pub­lic Debt Man­age­ment Agen­cy announced the sale of €650m worth of 3-year bonds, and €599m worth of 9-year bonds. The aver­age inter­est for the short­er term bonds was 5.4%, com­pared to the 4% at the pre­vi­ous auc­tion. The inter­est for the long-term bonds was 6.7%, com­pared to the 6.8% the pre­vi­ous time. Bids on 9-year bonds out­stripped sup­ply by 3.2 times and for 3-year papers, the ratio was 2.6 times. At the same time, the Bank of Por­tu­gal revised down its eco­nom­ic growth fore­cast for 2011, pre­dict­ing 1.3% shrink­ing against former pro­jec­tions of stag­na­tion. In late Novem­ber the coun­try adopt­ed the 2011 budg­et impos­ing strin­gent aus­ter­i­ty meas­ures. Accord­ing to these meas­ures, Por­tu­gal will cut expend­i­tures by some €3bn and will raise about €1.5bn from addi­tion­al tax­es. The gov­ern­ment aims at reduc­ing the nation's def­i­cit to less than 3% by 2014 from 9.3% of GDP last year.

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