September 18, 2020

Portugal Agrees to a $116 Billion Bailout

Mr. Sócrates said in a televised broadcast on Tuesday night that the creditors had agreed to give Portugal more time to cut its budget deficit than initially foreseen by his government. He described the outcome of the negotiations as “a good deal that defends Portugal.”

Still, he provided few details about the agreement, which will still require endorsement from opposition parties. Mr. Sócrates resigned in March after the Parliament refused to endorse additional austerity measures. To break the political deadlock, Portugal is set to hold another general election on June 5.

The political standoff was followed by Portugal’s bailout request in early April after the government also failed to meet its 2010 deficit target and after investors sent its borrowing costs to record highs, heightening concerns about its ability to meet forthcoming refinancing obligations.

Officials from the International Monetary Fund, the European Commission and the European Central Bank then arrived in Lisbon to discuss an aid program that would allow Portugal to receive European Union-led rescue money by June, the month when it faces its toughest refinancing hurdles of this year.

Simonetta Nardin, a spokeswoman for the I.M.F., confirmed that officials representing the international creditors had reached agreement with the Portuguese government “on a comprehensive economic program that could be supported by the E.C., the E.C.B. and the I.M.F.” She added: “We have said from the beginning that it is important that any program should have broad cross-party support and we will continue our engagement with the opposition parties to establish that this is the case.”

The deal will still require approval by the European Union. The European Commission, the executive of the 27-nation union, is hoping to get the measures ready for Europe’s finance ministers to discuss at a meeting on May 16.

However, even if the deal is blessed by the Portuguese opposition, other obstacles remain, most notably in Finland, where a party critical of euro zone bailouts won 19 percent of the vote in an election last month. It has said that it cannot support a Portuguese bailout and it remains unclear when a new Finnish government will be in place.

On Tuesday evening, meanwhile, Mr. Sócrates said he would present the deal to opposition parties and called on them to show “a sense of responsibility and a superior sense of national interest” to ensure Portugal receives emergency financing swiftly.

Mr. Sócrates said that, under the three-year plan, the deficit would need to be lowered to 5.9 percent of gross domestic product this year, 4.5 percent in 2012 and 3 percent in 2013. Last year, his government vowed to stick to a tougher schedule to lower the gap to 4.6 percent this year, 3 percent in 2012 and 2 percent in 2013.

He suggested that creditors had recognized that Portugal faced a less critical situation than other ailing euro economies. “Knowing other external aid programs, Portugal can feel reassured,” he said. Last year, Greece secured a bailout package worth 110 billion euros and Ireland 85 billion euros.

As examples of the relatively lenient terms granted to Portugal, he said the three-year program did not involve more cuts in public sector wages or in the minimum wage, or additional layoffs of state employees.

When the government requested a bailout early last month, Pedro Passos Coelho, the leader of the main Social Democratic opposition party, said that he backed the decision to seek outside help. However, in the run-up to next month’s general election, center-right opposition parties, who are leading in opinion polls, are unlikely to want Mr. Sócrates to reap the political benefit for negotiating a bailout that they blame his government for in the first place.

Stephen Castle contributed reporting.

Article source: http://www.nytimes.com/2011/05/04/business/global/04portugal.html?partner=rss&emc=rss

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