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07 April 2011

Portugal asks Europe for bailout


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Caught in a political crisis and facing refinancing hurdles, Portugal has come under intense pressure to join Greece and Ireland in seeking a bailout.


Portugal’s caretaker government gave in to market pressures on Wednesday and joined Greece and Ireland in seeking an emergency bailout. The decision came after the government was forced to pay much higher rates to sell more debt.

José Sócrates, Portugal’s prime minister, said in a televised address on Wednesday evening that he had requested aid from the European Commission after recognising that borrowing costs had become unsustainable.

“I had always considered outside aid as a last recourse scenario,” he said. “I say today to the Portuguese that it is in our national interest to take this step.” He did not, however, specify the timing of any bailout.

Portugal will probably need about €75 billion ($106.5 billion) in assistance, according to a recent estimate by Jean-Claude Juncker, the prime minister of Luxemburg, who presides over meetings of eurozone ministers. Some analysts have suggested that the amount could be as much as €100 billion.

A Portuguese bailout has long been expected, but the speed with which things moved on Wednesday appeared to have taken European officials in Brussels by surprise, leaving the timetable unclear. European leaders have been working to keep the financial contagion from spreading. Lisbon’s move now puts pressure on Spain, which has undertaken major economic reforms, budget cuts and a banking clean-up to stay out of danger.

In a statement, the president of the European Commission, José Manuel Barroso, said Portugal’s request “will be processed in the swiftest possible manner, according to the rules applicable.”

If the pattern of previous bailouts is repeated, a team of officials will be sent to Lisbon to discuss the conditions of a bailout, which will then need to be agreed upon by European finance ministers. That, however, will probably not happen for several weeks.

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© New York Times


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