EU-IMF creditors approve Portugal bailout plan

16th December 2013, Comments 0 comments

Portugal's international lenders have approved the country's performance so far under its 78-billion-euro bailout agreement six months before the programme is set to end, the government said Monday.

The green light from the "troika" of lenders -- the European Commission, the European Central Bank and the International Monetary Fund -- paves the way for the indebted eurozone nation to receive its next tranche of 2.7 billion euros in financial aid from its bailout.

"The tenth evaluation from 'the troika' has been positive. Portugal has passed ten out of 12 evaluations, there are just two left," Deputy Prime Minister Paulo Portas told a news conference.

The "troika" granted Portugal a 78-billion-euro ($107-billion) bailout in May 2011, with the country obliged to undertake tax hikes and spending, benefit and wage cuts in order to unlock the funds.

Portugal has so far received 71.4 billion euros of the bailout money it was promised.

A team of experts from the "troika" visited the country at the beginning of the month to assess the country's implementation of the reforms.

"It was a very quiet mission which confirms that we are on the right path to conclude the programme under the expected timeframe," Finance Minister Maria Luis Albuquerque told the news conference.

Portugal's centre-right coalition government hopes it can exit its bailout as planned in mid-2014 and return to financing itself fully in debt markets, just as Ireland is doing this month.

But it has said it could request some sort of precautionary loan from creditors after the exit.

Portas' CDP-PP junior coalition party will install a clock at its Lisbon headquarters which will count down the seconds until Portugal exits the bailout.

Portas unveiled the digital clock in the central city of Caldas da Rainha on Sunday.

"2014 will be the first year when we can talk about Portugal without troika," Portas said at the party gathering.

The government has approved a budget for 2014 which aims to save 3.9 billion euros, partly through cutting public sector salaries and pensions, which has provoked protests.

The 2014 budget still needs approval from the Constitutional Court that already shot down several austerity measures.

The high court is expected to rule this week on a decision to slash pensions for public workers by up to 10 percent.

"If the cuts to pensions are ruled out by the court, Portugal must quickly present a credible alternative or else its borrowing rate risks spiralling upward," said Pedro Lino, an analyst at Forex trading broker Dif Broker.

The bailout terms have deepened an economic downturn triggered by the world financial crisis in 2008 and sent the jobless rate soaring to record 17.1 percent in the first quarter of 2013.

But the jobless rate dipped to 16.4 percent in the second quarter as the country emerged from a two-and-a-half-year recession with growth of 1.1 percent.

The Bank of Portugal predicts th country should post growth of 0.8 percent next year, pulled by rising exports. It sees the economy contracting by 1.5 percent this year.


© 2013 AFP

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