Business World

Sunday 17 December 2017

Portugal may seek special loan deal when bailout ends

Axel Bugge and Andrei Khalip

PORTUGAL may follow Ireland and seek a precautionary loan deal when its bailout ends next year, assuming it passes a creditor review that is currently under way, deputy prime minister Paulo Portas said.

Inspectors from the European Union and IMF started their latest review of the bailout on Monday, with Portuguese officials calling on them to further relax Lisbon's deficit goals so as not to compromise a fledgling economic recovery.

The programme is due to end in mid-2014, after which Portugal is supposed to return to financing itself in markets.

"If Portugal gets through the (combined) eighth and ninth review in a positive way, it will be significantly closer to the end of the lending programme," Mr Portas said.

Lisbon wants to "end the period of being a protectorate" and would seek to avoid following Greece into a second rescue, he said. But it may seek to negotiate a precautionary lending programme as Ireland plans to do ahead of its own bailout exit.

"There's no possible comparison between the two things," Mr Portas said. "Portugal would be able to finance itself autonomously as well as benefit from a precautionary programme, which is not a second bailout."

The review is expected to be more difficult than previous inspections after a major government reshuffle in July, which left Mr Portas, who has challenged some austerity measures, in charge of negotiations with the lenders.

He re-iterated that Lisbon would at least try to persuade them to ease its 2014 deficit target to 4.5pc of gross domestic product from the current 4pc, after the issue was first raised during the previous review. This year Lisbon has to cut the gap to 5.5pc from 6.4pc in 2012.

RECESSION

"This difference (on the target) between the government and the troika is not from today, it was expressed in April. It would be strange if the government did not mention this in the name of national interests," Mr Portas said.

Lisbon still has to cut more than €4bn of public spending by the end of 2014. Business leaders and unions say that if implemented in full, the cuts would throw the economy back into its worst recession in decades after it showed signs of life in the second quarter.

Irish Independent

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