Thursday, February 17, 2011

EU: Portugal Now Seen as Requiring a Bailout By April

Reuters reports that European Union member states are very concerned about Portugal's ability to fund itself and believe Lisbon will need to a bailout by April.
Trouble is, Portugal has so far refused to discuss that need. "The EU has discussed a rescue plan for Portugal, but it is dependent on Lisbon asking for the aid and making that request to both the EU and the International Monetary Fund. Portugal remains adamantly opposed to asking for assistance".

"Portugal is drowning, it's not going to be able to hold on beyond the end of March," the euro zone finance source said. "That's already understood to be the case in financial markets, but now it's also understood among (EU) finance ministers."

"Portuguese officials have said in recent days that it is up to Europe as a whole to resolve the debt crisis, sending the message that if the EU can agree a "comprehensive package" to tackle the crisis by a summit set for March 24/25, that will help Portugal weather the pressure from financial markets.

Cabinet Minister Pedro Silva Pereira repeated that line on Thursday, saying that Portugal was doing all it could to cut its budget deficit and that it was now up to the rest of the euro zone to do its bit and agree the "comprehensive package".

"Any delay of an effective European response to confront this situation damages all the countries and the euro itself," Silva Pereira told reporters after a cabinet meeting.

"That is why our message is that Portugal is doing its work. Europe also needs to do its part."

"Portugal is so far managing to fund itself at the short end of the yield curve, but the cost of borrowing is now close to or at record highs and is becoming increasingly punitive."

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