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January 31, 2011 11:05 pm
Portugal’s leading bankers have lined up behind the Lisbon government in arguing that an international financial bail-out would worsen the country’s economic difficulties without easing its sovereign debt crisis.
Ricardo Salgado, chief executive of Banco Espírito Santo, said on Monday it was “highly probable” that a rescue by the European Union and the International Monetary Fund would lead to a flight of capital abroad and a fall in bank deposits.
Mr Salgado, who heads Portugal’s largest listed bank by market value, said the EU needed to do more to support growth in debt-burdened peripheral countries and not just intervene to ensure financial stability.
Many investors fear that Portugal will be forced to follow Greece and Ireland in turning to the European financial stability facility, the EU’s bail-out fund, for help as government borrowing costs remain close to levels that Lisbon concedes are unsustainable.
But top bankers have become increasingly vocal in support of José Sócrates, the prime minister, who insists that Portugal has no need of international assistance and can continue to finance its debt in the market.
Their backing for the government position comes in spite of liquidity difficulties caused by the eurozone debt crisis, which has virtually shut Portugese banks out of wholesale funding markets and forced them to rely on borrowing from the European Central Bank.
“We continue to believe that an intervention by the EU and the IMF is not the right option,” said Mr Salgado.
Fernando Ulrich, chief executive of Banco BPI, the third largest listed bank, has also urged the government and banks to do “everything possible” to avoid a bail-out.
Tough austerity measures approved by Mr Sócrates needed to be implemented with “discipline and rigour,” he said last week. “We have to work as hard as we can.”
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