Portugal’s €78 billion bailout on ‘better terms’ than Ireland
Portugal has reached agreement on a €78 billion bailout from the EU and the International Monetary fund, Jose Socrates, the caretaker prime minister has announced.
The deal makes the debt-laden country the third eurozone member to do so after Greece and Ireland.
However, Mr Sócrates said that the terms of the deal would be less onerous than those set for Greece and Ireland. The three-year loan was a "good agreement", he said in a televised address late last night.
Portugal will be given more time to reach its budget deficit targets than had previously been expected. This year's target has been raised to 5.9pc of gross domestic product from 4.6pc. The deficit must be cut to 4.5pc of GDP in 2012 and 3pc in 2013.
The deal will need broad cross-party support because the collapse of Socrates' government last month - pushing up borrowing rates and and forcing Portugal to seek financial rescue – the winner of a June 5 snap general election will implement it.
The interest rate on Portugal's bailout loan is expected to be set at a meeting of eurozone finance ministers in mid-May. Finance Minister Michael Noonan has said he hopes that Ireland can avail of a lower interest rate for the bailout by June, if French and German concerns were overcome.
Portuguese agreement to the loan terms is needed by June 15, when Lisbon needs to redeem €4.9bn of bonds.
“The government has obtained a good deal. This is a deal that defends Portugal,” Mr Socrates said. "I have always said that asking for aid would be the final way to go, but we have reached the moment."
Opposition Social Democrat leader Pedro Passos Coelho said he was ready to meet the lenders.
“We have said from the beginning that it is important that any programme should have broad cross-party support and will continue our engagement with the opposition parties to establish that this is the case,” European Commission spokesman Amadeu Altafaj said in a statement.
Officials from the European Commission, the International Monetary Fund and the European Central Bank have been in Lisbon for almost a month to reach the agreement.
When the initial request for financial aid was made, the European Commission president, José Manuel Barroso, said that Portugal's request for help would be dealt with as quickly as possible.
Mr Barroso offered assurances to Mr Sócrates that Portugal's request for support would be "processed in the swiftest possible manner, according to the rules applicable".
He also said that he had "confidence in Portugal's capacity to overcome the present difficulties".