Thursday, April 7, 2011

Portugal asks EU for financial bailout

Portuguese Finance Minister Fernando Teixeira dos Santos

Source: Press TV

Portugal's caretaker government has called for a bailout as the euro zone country struggles to buttress its weakening economy against a backdrop of soaring debts.

"In this difficult situation, which could have been avoided, I understand that it is necessary to resort to the financing mechanisms available within the European framework," Reuters quoted Portuguese Finance Minister Fernando Teixeira dos Santos as saying on Wednesday.

Santos said that the caretaker government is in dire need of the bailout fund due to its high debts and difficulty to raise money on international markets at a time when the threat of a double-dip recession becomes more of a reality.

In a televised address on Wednesday afternoon, outgoing Prime Minister Jose Socrates also reaffirmed calls for a bailout, saying the government has decided to request financial assistance from the European Commission.

If accepted by the International Monetary Fund (IMF) and the European Union (EU), Portugal would become the third financially troubled euro zone country after Greece and Ireland to have applied for a bailout.

Since the outbreak of the euro zone sovereign debt crisis in early 2010, there have been growing speculations that Portugal, one of the smallest and weakest economies in the 17-member bloc, would ultimately bow to outside pressure and apply for the financial bailout, jus as Ireland and Greece did back in November last year.

The European Union and the IMF unveiled an economic rescue package worth 750 billion euros ($1 trillion) last year in an effort to prevent the debt-stricken countries such as Greece and Ireland from plunging into total economic wreck.

Analysts say Portugal will need up to 80 billion euros (USD 114.4 billion) in order to finance its economy and rein in the budget deficit, which rose to 8.6 percent of GDP in 2010 -- way above the government target of 7.3 percent.

On March 23, the Portuguese prime minister resigned and his government collapsed after the parliament rejected a package of austerity measures, including budget cuts and tax hikes.

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