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No bridging role for Portugal: EU

Europe cannot offer Portugal a bridging loan and long-term financial aid remains dependent on radical changes to its economy, the head of the European Commission said Wednesday.

“It is not possible to provide bridging loans,” former Portuguese prime minister Jose Manuel Barroso told reporters in Brussels as negotiations on tackling the nation’s debt crisis unfold in Lisbon.

Barroso insisted financial aid, expected to total 80 billion euros ($116 billion) but only due to be paid to a new Portuguese government after a June 5 general election, “will be a medium-term programme with strict conditions.”

He maintained there is no scope for short-term financing arrangements under the present scope of rescue funding agreed among European partners — a set of rules Barroso insisted were also fully backed by the Lisbon government.

Portuguese President Anibal Cavaco Silva is among a number of domestic figures to have called for a bridging loan to get the Lisbon government through to June 15, when it must repay some 5.0 billion euros.

The EU and the IMF have each warned that Lisbon will have to implement more public spending cuts, tax rises and far-reaching privatisation to secure its bailout.

Experts are currently poring over the country’s books in Lisbon as Portugal battles a debt crisis that has already seen Greece and Ireland secure deals for Eu-IMF bailouts worth nearly 200 billion euros.

With the cry for EU aid seen in Portugal as a painful humiliation, outgoing Prime Minister Jose Socrates’ cabinet said he would on Wednesday meet representatives of the country’s main political parties in parliament to discuss the aid plan.

Given the “very difficult” timetable — a hostage of sorts to the election campaign — Barroso said he “hoped Portuguese (party) leaders will assume their responsibilities,” meaning both to the nation’s finances and their EU partners.

Key EU finance commissioner Olli Rehn has already shown signs of losing patience with domestic political electioneering.

“Let’s not have a public dialogue every day — let’s focus on the work preparing the programme,” Rehn said after EU finance ministers mandated experts to negotiate a “cross-party” agreement.

“We will do everything to guarantee that this programme is wrapped up so that the payment of the first tranche meets Portugal’s financing needs,” Barroso added.

Most analysts believe Lisbon must have the EU-IMF rescue loans agreed before the key June 15 redemption date if it is to avoid default.

Prime Minister Socrates quit last month — prompting the general election — after all five opposition parties voted against his minority government’s latest package of austerity measures.

The austerity plan — the government’s fourth in a year — was aimed at preventing Portugal from becoming the third euro zone country after Greece and Ireland to seek a multibillion-euro bailout from the EU and the IMF.