Portugal is third nation to ask EU for bailout
PORTUGAL asked for financial aid from the European Union last night, becoming the third country after Ireland and Greece to beg for a bailout.
"I tried everything but we came to a moment that not taking this decision would bring risks we cannot afford," said Prime Minister Jose Socrates, who went on national television last night to explain his decision to Portugal's 10.6 million people.
Unlike Ireland, where the Government collapsed in the wake of the bailout, Portugal's government fell last month and is now a caretaker administration until elections in early June.
The country's largest opposition group said last night that it would support the government's request for external aid.
Mr Socrates, who broadcast from the prime minister's official residence in Lisbon, didn't give details on the kind of package that Portugal needs.
Analysts said, however, that the country will need €70bn to cover the deficits.
The European Commission said that the request will be processed in the "swiftest possible manner".
The IMF in Washington said that "it stands ready to assist if needed".
European finance ministers gather in Budapest tomorrow for two days of talks, which had been expected to discuss Irish problems as well as other issues.
Those talks are now likely to be overshadowed by Portugal's request.
It is not the first time Lisbon has had to ask for help. The last time was in 1983, shortly after the country overthrew its military-backed government, when it turned to the IMF for help.
Like Ireland under former Taoiseach Brian Cowen, Mr Socrates denied until the last moment that a financial rescue was needed, despite analysts warning for months that a bailout was inevitable.
The government cracked a few hours after the country sold bonds yesterday and was forced to pay a higher interest rate to borrow for just one year than the 5.8pc Ireland is paying to borrow under the EU/IMF bailout package.
Portugal surpassed Ireland as a default risk earlier this week.
The Portuguese debt agency did not say who had bought the bonds but market analysts speculated that demand came from investors in strong emerging markets such as Brazil and China.
Lisbon has been punished by financial markets because its economy has barely grown in the past decade as its budget deficit soared.
The country's economy has expanded at an average annual rate of less than 1pc in the past decade, ranking among Europe's weakest growth rates.
Unemployment rose to 11.1pc in the fourth quarter, the highest since at least 1998, as the economy contracted for the first time in a year.
Last night's admission came after a torrid day on the markets which saw gold and other commodities surge ahead of an expected rise in European Central Bank rates today which will push up mortgages for 85pc of Irish mortgage holders.
Oil price futures surged to a 30-month high while gold reached an all-time high of $1,459 (€1,018) an ounce.
The euro jumped to a 14-month high, due to a decline in the dollar, as markets bet that the 23 members of the ECB governing council would push through a 0.25pc rise in the base rate to 1.25pc.
This is expected to be just the first in a string of rises in the coming months.