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Last updated: April 6, 2011 9:54 pm
José Sócrates, Portugal’s outgoing prime minister, has asked the European Union for financial assistance, paving the way for the third bail-out of a eurozone country after Greece and Ireland.
“The government decided today to ask the European Commission for financial help,” Mr Sócrates said in a brief television address on Wednesday night.
The request was welcomed by EU officials. “It is a responsible move by the Portuguese government,” Olli Rehn, the EU’s top economic official, told the Financial Times.
José Manuel Barroso, the former Portuguese prime minister who is now president of the European Commission, issued a statement saying he had been informed of Mr Sócrates’ request and was confident in Lisbon’s ability to “overcome the present difficulties”.
He added that “this request will be processed in the swiftest possible manner according to the rules applicable”.
Mr Sócrates said he would negotiate the terms of an agreement in the “best interests of Portugal”. He had previously insisted that the country did not need outside help and could continue to finance its debt.
Fernando Teixeira dos Santos, Portugal’s finance minister, foreshadowed Mr Sócrates’ announcement in earlier comments to the Jornal de Negócios, a Lisbon business daily.
“The country was irresponsibly pushed into a very difficult situation in the financial markets,” Mr Teixeira dos Santos said, referring to the minority socialist government’s defeat two weeks ago in a vote on austerity measures. “Faced with this difficult situation, which could have been avoided, the outgoing government would have to seek financial assistance from the EU.”
Pedro Passos Coelho, leader of the opposition Social Democrats, said he would support the request.
Portugal’s borrowing costs have soared to what the government acknowledges are unsustainable levels after its parliamentary defeat on a package of austerity measures, which led to Mr Sócrates’ resignation. An election will be held on June 5.
The government was forced to pay yields above 5 per cent to raise €1bn in short-term debt on Wednesday. According to Filipe Silva, head of public debt trading at Banco Carregosa, the jump in yields from the previous equivalent auctions a month ago will translate into an extra €11m ($15.7m) in interest payments.
Although Mr Sócrates had previously resisted outside aid, Portuguese officials had already begun preliminary talks with the European Commission about securing short-term financing until a new government is in place.
Senior officials have been engaged in discussions about how a rescue package could be triggered. Policymakers are confident that Lisbon will be able to meet €5bn in bond redemptions and interest payments that fall due on April 15.
But a further €7bn due on June 15 is a cause for concern, particularly as the newly elected government will not have taken office.
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