Germany not pressuring Portugal on bailout: Merkel

10th January 2011, Comments 0 comments

German Chancellor Angela Merkel on Monday said Berlin was not putting pressure on Portugal to accept a European bailout, adding that it was up to individual countries to request aid if they needed it.

"Portugal has not asked for it and we will not put pressure on Portugal to take it," Merkel said at a joint press conference with Maltese Prime Minister Lawrence Gonzi during a visit to the tiny Mediterranean island nation.

"We never put pressure on any country to take certain steps. They know help is available but these countries are free to ask for solidarity if they need it," she said, adding: "A country needs to apply for help."

An EU diplomat earlier said several European countries are piling pressure on Portugal to seek a bailout amid fears the eurozone debt crisis might spread further and the borrowing rates for Portugal hit new highs.

"There is a lot of pressure on Portugal," the diplomat told AFP.

"Every European country wants Portugal to make more budget savings than planned, and several countries want it to ask for external financial aid," the diplomat said on condition of anonymity.

Lisbon is raising taxes and cutting wages as it tries to convince investors it can narrow its budget gap from 7.3 percent of gross domestic product in 2010 to 4.6 percent this year, still above the EU limit of 3.0 percent.

The interest rate demanded by investors to lend money to Portugal and neighbouring Spain hit new highs on Monday, a bad omen in a week when both countries will seek to raise funds on the bond market.

The rate on Portuguese 10-year debt rose on Monday to 7.139 percent from the closing value on Friday, when it reached a record of 7.193 percent.

The yield on Spanish 10-year debt hit 5.562 percent, up from 5.526 percent, the highest rate since 2000.

To help stabilise the eurozone, the EU agreed last month to change the bloc's treaty to create a permanent crisis fund to rescue nations in need.

The mechanism will replace a temporary, 750-billion-euro (trillion-dollar) EU-IMF financial safety net that was set up in May and expires in 2013.

Portugal is viewed by many analysts as the eurozone country most likely to follow the example of Ireland and Greece as it grapples to cut its debts and borrowing costs.

© 2011 AFP

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