No new bailout for Portugal, says PM
Portugal will avoid a new bailout, Prime Minister Pedro Passos Coelho said Friday, despite the eurozone country having difficulty bringing its public finances back into balance and rising discontent with austerity measures.
“A second rescue plan isn’t necessary. Having recourse to a second bailout plan would be a too great of a risk for the country,” Passos Coelho told lawmakers the day after Portugal’s creditors approved its implementation of the current programme.
After the country’s top court rejected a key measure in August, Coelho had evoked the possibility Portugal would need a second bailout if it couldn’t control public spending.
But Passos Coelho told lawmakers Friday that “nearly everything is in place to conclude the rescue programme successfully.”
Portugal received a 78-billion-euro ($106 billion) bailout in May 2011 from the EU and International Monetary Fund which lasts until June 2014.
In exchange for the lifeline, Portugal’s government has imposed tax increases and wage cuts in a bid to balance the budget, aggravating a downturn that has sent unemployment to a record 17.7 percent.
Despite growing discontent, the government has largely pushed forward with measures to repair public finances as it seeks further disbursements of bailout funding.
Auditors from the EU, IMF and European Central Bank on Thursday gave a positive review of budget efforts made by Portugal, which paves the way for the payment of 5.6 billion euros in loans under the bailout programme.
While Portugal cut the public deficit to 7.1 percent of annual economic output in the six months of this year, it remains far from achieving its target 5.5 percent this year and 4.0 percent in 2014.
President Anibal Cavaco Silva has also said he believed Portugal will not need a second bailout, but evoked the possibility it could receive other help from European institutions.
This could mean the ECB acting as a backstop in debt markets, which would help ease Portugal’s return to the debt markets next year.
Passos Coelho also noted the improved economic outlook for Portugal, which would reduce the impact of austerity measures and improve public finances which have weakened by the recession.
Portugal exited a two-year recession in the second quarter with 1.1 percent growth.
“The data available lead us to believe the third quarter will also be positive,” said Passos Coelho.
“We now know that our economy can reverse its decline.”
On Thursday the government revised up its growth forecasts. It now expects a less severe contraction of 1.8 percent in 2013 instead of 2.3 percent expected earlier.
For 2014 it sees the Portuguese economy growing by 0.8 percent instead of 0.6 percent.