Portugal has no funding problems

15th December 2010, Comments 0 comments

Portuguese Prime Minister Jose Socrates said his country can still raise funds from the markets despite the eurozone debt crisis because investors understand the reforms the government has introduced.

PARIS, December 14, 2010  - "We are doing what we need to do -- consolidating the budget deficit very quickly and very effectively on the basis of structural reforms," Socrates told the Financial Times in an interview Tuesday.

"Markets will understand this more and more," he said.

Portugal has come under increasing pressure in recent months after debt and deficit problems in first Greece and then Ireland led to EU-IMF bailouts when they could no longer raise fresh cash from the markets at sustainable rates.

The crisis drove speculation that Lisbon and possibly Madrid could be next in line although tensions have eased slightly since Ireland's rescue this month.

While Portugal has to cover 20 billion euros (26 billion dollars) in debt due by mid-2011, Socrates said Lisbon would have no problems in funding.

"Portugal has the necessary conditions to go on raising debt in the market," he told the FT.

"We have had no banking crisis or property bubble. Our only problem was an excessive budget deficit due to the global crisis and we are correcting that."

Socrates said government reforms, especially on pensions and social security reform, meant Portugal was doing better than other countries in stablising its public finances.

"Markets will increasingly understand that Portugal is doing what it needs to do and is ahead of most other countries in terms of budget consolidation," the prime minister said.

Finance Minister Fernando Teixeira dos Santos said Tuesday that Portugal could count on continued support from China, after returning from a trip to Beijing along with senior government debt officials.

"We have here a partner which will continue to support Portugal, as it already has," he was quoted as saying by the Portuguese news agency Lusa.

"We have made a major step in the reinforcement of our relations on all levels, on commercial ties as well on planned investments and in the area of financing," he said.

Concrete measures of support were not mentioned.

During a November visit to Lisbon Chinese President Hu Jintao pledged to help Portugal shed its fiscal crisis but made no firm promises regarding investments or purchasing Portuguese government debt.

The Portuguese parliament last month approved a budget to cut the public deficit to 4.6 percent of national output in 2011 from 7.3 percent this year.

Analysts say, however, that it might not be enough to reassure markets that the country will not need a bailout from the International Monetary Fund and the European Union like Greece and Ireland.


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