Portugal

Portugal should get the next installment of its euro78 billion ($107 billion) bailout package because it is expected to meet its debt-cutting targets this year, a report from the International Monetary Fund said Tuesday, the Associated Press reported. Portugal asked for a rescue earlier this year as it slid towards bankruptcy and stoked investor fears about the wider eurozone's fiscal problems. Its European partners and the International Monetary Fund agreed to lend it money on condition it met a strict timetable of measures, including austerity packages and economic reforms, through 2013.

Portugal has announced new austerity measures designed to cut its budget deficit to almost zero in under five years, promising the biggest cuts in government spending for more than 50 years, the Financial Times reported. Vítor Gaspar, finance minister, said on Wednesday the planned reduction in public expenditure by 2015 – by 7 percentage points to 43.5 per cent of gross domestic product – was “without precedent” in recent Portuguese history.

George Soros, the US speculator turned billionaire philanthropist, has suggested both Greece and Portugal quit the European Union and the euro-zone because of their massive debts, Agence France-Presse reported. "One has so mishandled the Greek problem that the best way forward at present might be an orderly exit" with Greece leaving both the EU and the euro common currency, he said in an interview published Sunday by the German magazine Spiegel. He suggested the same might go for Portugal. "The EU and the euro would survive it," he added.

Portugal's five-week-old government took its first major proposal for labor reform to Parliament on Thursday, seeking approval for a reduction in compensation entitlements for laid-off workers, the Associated Press reported. The proposal is part of a long list of measures Portugal pledged to adopt in return for a euro78 billion ($112 billion) bailout that spared it from bankruptcy and was part of European efforts to contain the continent's debt crisis.

The European Central Bank took steps to protect Portugal's banking system after Moody's Investors Service cut the country's debt to junk status, The Wall Street Journal reported. The ECB said it would indefinitely suspend existing rules that require at least one investment-grade rating by a major rating agency in order to accept government bonds as collateral for ECB loans. Although Portugal still meets those requirements even after the Moody's downgrade, the suspension removes any uncertainty even if other agencies follow suit in coming weeks.

Portugal’s credit rating was cut to below investment grade by Moody’s Investors Service on concern the country will need to follow Greece in seeking a second bailout. The euro dropped for the first time in seven days, Bloomberg reported. The long-term government bond ratings were lowered to Ba2, or junk, from Baa1, and the outlook is negative. Discussions to involve private investors in a new rescue plan for Greece make it more likely that the European Union will require the same pre-conditions in the case of Portugal, Moody’s said in a statement.

Portugal's center-right Social Democrats had little time to savor their return to power Monday, launching immediately into getting a ruinous debt burden under control despite a shrinking economy, the Associated Press reported. Social Democrat leader Pedro Passos Coelho scored an emphatic win at the ballot box Sunday, with his party collecting 39 percent of the vote to 28 percent for the second-placed Socialist Party, which had governed for the past six years. Passos Coelho takes over as prime minister later this month with Portugal in the middle of a financial storm.

Finnish lawmakers failed Tuesday to reach a clear all-party majority on whether to support the country's participation in a bailout of Portugal, The Wall Street Journal reported. Lawmakers had discussed the country's participation in the bailout within their own parties, ahead of a scheduled decision in the Grand Committee of the Finnish parliament on Wednesday. The Grand Committee decides parliament's position on EU legislation and the decisions by its 25 members are politically binding.

Portugal's financial bailout will be tough for the country's banks, but they should be able to raise their capital ratios without tapping the aid, the heads of the main Portuguese banks said Friday, The Wall Street Journal reported. "We expect to raise our ratio through our shareholders, markets and portfolio sales," Banco Comercial Portugues SA President Carlos Santos Ferreira said in a televised event, adding that fire sales won't happen. The heads of Banco Espirito Santo SA's and Banco BPI SA echoed the comments.

One day after agreeing to a $115.5 billion rescue package, Portugal was forced to offer higher interest rates on its debt, spurring fears that, as in Greece and Ireland after their aid deals, financing costs in the country will continue to escalate, the International Herald Tribune reported. While all three countries will benefit in the short term from the loans coming from the European Union and the International Monetary Fund, their ability to continue to raise affordable short-term funds from international investors is considered crucial.