Portugal

Portugal’s borrowing costs climbed to a record Thursday, a day after the collapse of the government in Lisbon raised expectations that the country would be forced to seek an international bailout, the International Herald Tribune reported. The prime minister José Sócrates offered his resignation late Wednesday after his minority Socialist government failed to win parliamentary backing for its latest package of austerity measures, which were designed to bring down the country’s high budget deficit.

The future of Portuguese Prime Minister José Socrates hangs in the balance, as the outcome of an austerity vote could lead to his resignation and push the government closer to a financial bailout by the European Union and International Monetary Fund, The Wall Street Journal reported. Legislators will vote Wednesday on a series of new austerity measures unveiled earlier this month by the government, which said the plan is needed to cut the budget deficit and regain the confidence of bond investors. The main opposition parties plan to vote against those measures. Mr.

Euro zone leaders are set to agree a "competitiveness pact" at a summit on Friday and will push Portugal to announce new reforms to increase market confidence as they seek to draw a line under the debt crisis, Reuters reported. Germany has lowered expectations for a major breakthrough at the summit, saying the best that can be hoped for is an agreement on competitiveness. Bigger decisions to tackle the crisis -- such as whether to strengthen the euro zone bailout fund -- will be handled at an end-March summit.

Klaus Regling, the chief executive of the European Financial Stability Facility (EFSF), has said he does not expect Portugal or Spain to ask for bailouts, the Irish Times reported on an Austrian state radio ORF story. “At the moment it looks like Ireland will be the only country to have tapped the EFSF,” Mr Regling said. “I don’t see any need at all any more for Spain” to take money, he said, adding that “Portugal still has to do some work”. While the EFSF would have sufficient funds for additional bailouts, giving funds “currently doesn’t look necessary”, he said.

Portugal's plan to cut its budget deficit could be hurt by a rise in oil prices and raw materials, but the government is ready to launch new austerity measures to stay on track, Finance Minister Fernando Teixeira dos Santos said Monday, The Wall Street Journal reported. "We have correction mechanisms that will allow us to meet the targets we have set," Mr. Teixeira dos Santos said at a Reuters-Radio TSF conference in Lisbon.

Portugal is under increasing pressure to take a bail-out as its borrowing costs have stayed above a level widely considered unsustainable for longer than Greece and Ireland before their rescues last year, the Financial Times reported. Portugal’s benchmark market interest rates were above 7 per cent for the 16th consecutive trading day on Friday, closing at 7.55 per cent. Greece and Ireland, the two eurozone countries to seek bail-outs so far, lasted 13 and 15 trading days respectively with bond yields of more than 7 per cent.

Some European officials are quietly discussing contingencies for what might be a Portuguese request for financial aid as early as next month, when the highly indebted country begins facing large-scale debt redemptions, The Wall Street Journal reported. Financial pressure on the country's treasury is increasing, a topic that is likely to come up at the March 11 and March 24 meetings of European Union leaders, according to people familiar with the discussions. Portugal has raised €4.75 billion ($6.5 billion) via bond sales so far this year.

The European Central Bank has intervened in eurozone bond markets for the first time in weeks, buying Portuguese debt amid fears that the country could yet seek an international rescue, the Financial Times reported. The ECB returned to the market on Thursday as Portugal’s cost of borrowing on 10-year debt jumped to a euro-era high of 7.63 per cent, traders said. The ECB temporarily suspended its bond-buying programme in mid-January.

The euro zone's debt crisis is entering a new phase after a brief Christmas lull as Portugal struggles to persuade investors to buy its bonds and other European governments step up pressure on the country to seek an international bailout, The Wall Street Journal reported. Portugal hopes to raise new funds in a bond auction on Wednesday, despite a market sell-off in recent days that pushed the interest yield on Portuguese 10-year bonds above 7% Friday, the highest level since the euro's creation.

Fitch Ratings cut its rating on Portugal, citing concerns about a "deteriorating near-term economic outlook" and a "much more difficult financing environment" for the European nation's government and banks, the Wall Street Journal reported on Friday. The ratings agency also kept its ratings outlook negative, meaning future downgrades are possible, as it warned that additional measures might be needed to realize the government's deficit-reduction targets.