Portugal EU aid bid 'sensible', 'necessary': Berlin

7th April 2011, Comments 0 comments

Portugal's request for EU aid is a "sensible and necessary step," given the economic and financial situation of the debt-stricken country, Germany's finance minister said Thursday.

"The markets also seem to see it this way, judging from initial reactions," Wolfgang Schaeuble said in a statement, as European finance ministers prepared for talks in Budapest likely to be dominated by the eurozone's debt crisis.

After insisting for weeks that it did not need to go cap-in-hand to Brussels, the government in Lisbon finally threw in the towel on Wednesday, bowing to severe market pressure.

Outgoing Portuguese Prime Minister Jose Socrates said a bailout became inevitable when lawmakers rejected new austerity measures presented as the last chance to balance the country's strained public finances.

Citing government sources, Portuguese newspaper Diario Economico said Lisbon requires 90 billion euros ($128 billion) in aid, five billion more than Ireland's bailout package.

Luxembourg Prime Minister Jean-Claude Juncker, who heads the Eurogroup of finance ministers, has suggested 75 billion euros would be needed from the European Financial Stability Fund (EFSF).

The shock announcement threw the spotlight on its wealthier neighbour, Spain, which has scrambled to slash spending to reassure markets that it will not be the next domino to fall after Athens, Dublin and Lisbon.

Schaeuble said Lisbon's request showed the effectiveness of the bailout fund.

"This demonstrates that the procedure agreed in Europe in May 2010 is working. With the EFSF, there is a clear framework for negotiation in such situations," he said.

European stocks mostly steadied and the euro fell slightly against the dollar as analysts said traders effectively shrugged off the news after months of speculation that Lisbon would call for help.

© 2011 AFP

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