December 6, 2023

Portugal Says It Has Negotiated a Bailout Loan of $116 Billion

Portugal’s government collapsed last month, sparking a sharp rise in borrowing costs that forced Lisbon to become the third euro zone country to seek a bailout after Greece and Ireland.

Mr. Socrates, who now faces a snap parliamentary election on June 5, hailed the package as a victory, saying it included more lenient terms than those imposed on Greece and Ireland.

The deal gave Portugal more time to meet budget goals which it had previously agreed to.

“The government has obtained a good deal. This is a deal that defends Portugal,” Mr. Socrates said.

He provided few details of what terms the bailout included, saying only “there are no financial assistance programs that are not demanding.”

Filipe Garcia, head of Informação de Mercados Financeiros consulting firm in Porto, said: ”He showed us the bright side of the moon, it is the dark side that remains to be seen, and that includes the interest rate”.

Mr. Socrates said Portugal would need to cut its budget deficit to 5.9 percent of gross domestic product this year, compared with the government’s previous goal of 4.6 percent. The deficit will have to be cut to 4.5 percent in 2012 and 3 percent in 2013.

“Some of the parameters look a little softer than expectations such as the higher deficit target and longer time line,” said Vitaly Serebryakov, currency strategist at Wells Fargo in New York.

Officials from the European Commission, the International Monetary Fund and European Central Bank have been in Lisbon for almost a month to hammer out the agreement with Portugal.

Mr. Socrates said the agreement still has to be presented to opposition parties.

The opposition leader, Pedro Passos Coelho with the Social Democrats, said earlier that he was ready to meet with the lenders.

A new government after the June election will have to enact the terms of the bailout. Mr. Socrates said the loan agreement would not require any changes to the constitution.

The deal is expected to be approved at a meeting of euro zone finance ministers in mid-May, in time for the European rescue fund to raise money for Portugal by June 15, when the country needs to meet a bond redemption of 4.9 billion euros.

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