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EU, IMF experts discuss bailout with Portugal

EU and IMF experts began work Tuesday with Portugal on working out the details of an 80-billion-euro bailout package which is seen locally as a painful humiliation.

The European Commission, the European Central Bank and the International Monetary Fund experts were setting out their programme for discussions on the technical aspects of the bailout, a delegation spokesman said.

The spokesman said he could not give details of the expected talks with Portuguese officials having to come to terms with the third eurozone debt bailout after Greece and Ireland last year.

These technical talks, whose findings will then go into discussions with Portugal’s political leaders, will be closed to the press, Lisbon said.

The debt rescue, finally agreed to after months of agonising efforts to avoid having to call for help, is hugely controversial in Portugal where many see it as a humiliation for the country.

“The team of experts which arrived today in Lisbon … come here to mark our failure. Every step they take down from their plane will be a blow to our pride, our independence and freedom of action,” Pedro Santos Guerreiro, head of business daily Jornal de Negocios wrote in an editorial.

“The country stands humiliated,” he added.

The technical talks should be relatively straightforward compared to the political discussions which will be held as early general elections on June 5 loom increasing large.

The EU and the IMF have offered to help Portugal but have warned that in return Lisbon will have to implement more public spending cuts, tax rises and far-reaching privatisation.

The programme is supposed to be worked out by mid-May, ahead of the elections.

The major political parties have said they accepted the need to ask for a bailout but the pressure of campaigning for polls could make the negotiations fraught with political calculations.

Socialist Prime Minister Jose Socrates was forced to seek a bailout after parliament last month rejected the latest austerity measures proposed by his minority government, prompting his resignation.

“The goal is to have the strongest possible consensus and a clear commitment, whatever the outcome of the elections,” European Commission spokesman Cezary Lewancowicz said Sunday of the talks.

Portuguese pleas for flexibility on the part of the EU and IMF have got short shrift, with EU Finance Commissioner Ollie Rehn saying: “Let’s not have a public dialogue every day — let’s focus on the work preparing the programme.”

Socrates’ government adopted a series of very unpopular spending cuts, tax hikes and economic reforms in an effort to get the public deficit back down to the EU norm of 3.0 percent of Gross Domestic Product by 2012.

This year, it was supposed to be reduced to 4.6 percent but in 2010, the deficit blew out to 8.6 percent of GDP, way over the 7.3 percent target.

That proved to be the last straw for markets demanding ever higher rates of interest from Lisbon to hand over fresh cash to cover its maturing debt.

Portugal has to repay some 5.0 billion euros ($7.2 billion) in debt by June 15 and most analysts believe it must have the EU-IMF rescue loans agreed by then if it is to make the payment and so avoid default.