Portugal

Portugal has reached agreement with the European Union and International Monetary Fund on a three-year bailout loan of 78 billion euros or about $116 billion, the caretaker Prime Minister Jose Socrates said on Tuesday, the International Herald Tribune reported on a Reuters story. Portugal’s government collapsed last month, sparking a sharp rise in borrowing costs that forced Lisbon to become the third euro zone country to seek a bailout after Greece and Ireland. Mr.

Greece and Portugal are deeper in debt than previously estimated, according to official figures that show attempts to contain their financial woes have so far failed, The Guardian reported. The statistics agency Eurostat said Greece's deficit hit 10.5% of economic output in 2010, well above the 9.6% the European commission expected last autumn. Portugal, which is negotiating a bailout similar to those for Greece and Ireland, saw its debts reach 9.1%, far ahead of the 7.3% the commission used as a benchmark until only a few months ago.

Lights in Lisbon’s finance ministry will burn late into the night this weekend as European Union, International Monetary Fund and Portuguese officials toil over the details of the country’s €80bn ($116bn) bail-out agreement, the Financial Times reported. Outside, the streets have been deserted since Thursday, when the caretaker government granted public administration workers an extra half-day holiday so they could leave early for the long Easter weekend.

Portugal raised euro1 billion ($1.4 billion) at a short-term debt auction at higher interest rates as it negotiates terms of a badly needed bailout to avert bankruptcy, the Associated Press reported. The government debt agency said it sold euro680 million in 3-month bills at an average interest rate of 4 percent, up from 3.7 percent at the last such auction in January. Demand for the debt was double the amount sold. The agency also sold euro320 million in 6-month bills at an average rate of 5.5 percent, up from 5.1 percent on April 6. It was 3.7 times oversubscribed.

Portuguese banks will likely have to step up efforts to cut reliance on borrowed money in exchange for having some of the estimated €80 billion (about $114 billion) bailout earmarked for the country, senior bank officials say, The Wall Street Journal reported. Official negotiations between Portugal and officials from the European Union and the International Monetary Fund started Monday, after the country became the third in the euro zone to turn to its peers for help to tackle its persistently large deficit and low growth prospects.

Europe's struggling periphery is bracing for another blow to its already grim economic growth prospects, this time from the soaring euro, which touched a 15-month high against the dollar on Wednesday, The Wall Street Journal reported. The euro's rise, which makes products from the single-currency zone more expensive in global markets, will affect exporters throughout the 17-member currency bloc—particularly with global trade set to slow dramatically this year. The euro is almost 10% higher against the U.S. dollar since the start of the year, and 4% higher against the British pound.

When the details of Portugal’s rescue package are announced next month, pay attention to the economic growth assumptions that are negotiated between the European authorities, the International Monetary Fund and the Portuguese government, the Real Time Brussels blog reported in an analysis. If the loan package for Greece is any guide, the EU and the IMF tend to be too optimistic about growth prospects in countries that are about to slash spending and raise taxes in the face of already-high unemployment.

International creditors started discussing the terms of a bailout for Portugal on Tuesday amid concerns that their initial challenge would be to sort out the country’s political disputes rather than its financial situation, the International Herald Tribune reported. The negotiators will seek to persuade feuding political parties to bury differences that have intensified in the buildup to a general election on June 5, which was called because of a parliamentary standoff over how to clean up the Portuguese government’s finances.

Portugal's main opposition leader, the front-runner for the prime ministerial post, said the next government should be given the chance to negotiate some of the austerity measures needed by the country, The Wall Street Journal reported. "It is important that while we guarantee necessary measures are taken in 2011, it is possible to leave some of them for the future government to negotiate, so it could reflect the strategy the Portuguese will choose in the elections," Pedro Passos Coelho said in a speech at his party's conference.

EU economics commissioner Olli Rehn brushed off a push from Portugal to rethink European demands on the country’s political leaders to agree a common economic policy before a general election in June, the Irish Times reported. Saying a rapid cross-party agreement was important both for Portugal and for Europe, Mr Rehn said such an accord was crucial if an EU/IMF bailout deal was to be reached by mid-May. Experts from the EU Commission, the European Central Bank (ECB) and the IMF will meet Portuguese civil servants tomorrow to assess the country’s aid requirement.