Officials representing Portugal's international lenders arrive in Lisbon to assess a new round of austerity measures, as the government struggles to keep the country's €78 billion rescue programme on track and avoid a second bailout.
Payment of the next €2 billion instalment of Portugal’s bailout loans and final approval of an agreement to give Lisbon seven more years to pay them back depend on a successful outcome for the mission, which was triggered by a constitutional court decision to strike down €1.3 billion in planned budget cuts.
Officials from the troika will examine Lisbon’s proposals for replacing the measures rejected by the court as well as details of a further €4 billion in medium-term cuts required under the bailout. The visit comes amid concern that Portugal could struggle to avoid a second bailout even if Pedro Passos Coelho, the prime minister, manages to keep his deficit-reduction plans on track and the maturities of existing rescue loans are extended. A document prepared by the troika for eurozone ministers and seen by the Financial Times says Lisbon will have to raise much more debt after its planned exit from the bailout programme in July 2014 than it did before the sovereign debt crisis.
Mario Soares, the former socialist prime minister and president who steered Portugal’s entry into the EU, said the country would never be able to pay off its debts. Public debt currently stands at more than 123 per cent of gross domestic product. “No matter how much [the government] impoverishes people or steals from their pensions, the state will never be able to pay back what it owes”, he said.
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