As Portuguese finance minister Fernando Teixeira dos Santos announced agreement with the EU and IMF in Lisbon for a debt rescue worth 78 billion euros ($116 billion), Strauss-Kahn and Rehn stressed in a joint statement issued in Brussels that the success of a “socially-balanced” programme “will require a truly national effort.”

“We recognise that this programme will require major efforts from the Portuguese people,” they added of what they termed a “defining moment” for the country, the third eurozone state to need an international bailout.

Measures to rein in Lisbon’s public deficit will see pensions hacked back, health spending slashed, sales taxes rise, laws protecting workers ripped up and unemployment benefit stripped down alongside a raft of sell-offs for valuable national assets.

“We strongly support the authorities’ intention to protect the most vulnerable groups and to ensuring that (the programme) is implemented in a socially balanced way,” said Rehn and Strauss-Kahn, tipped to run for the French presidency next year on a Socialist ticket.

“One of the goals of the substantial external support being provided is to help reduce the social costs of the economic changes that are needed to build a better future for the country,” they said.

Portugal’s public deficit of 9.1 percent last year must be cut to the eurozone ceiling of 3.0 percent of output by the end of 2013.

A fund will be set up to support banks if they need help.

But the programme does not require abolition of a 13th and 14th month of pay for civil servants as many had feared.

There are also measures to help raise competitiveness in the economy, including a cut in charges on employment.

“Significant challenges lie ahead,” the bailout chiefs said.

However, in a message aimed at international money markets they insisted that “the Portuguese people have shown many times before in history that they can rise to the challenge.

“We have every confidence that they will do so again.”

The EU is trying to persuade sceptical economists that a sovereign and banking debt crisis that erupted when Greece was bailed out last year has been contained with the subsequent Irish and Portuguese deals.

Speculation that Spain, labouring under big bank debts, high unemployment and a lacklustre economy, could be next in line has receded recently.

“The Portuguese economy faces considerable challenges and we believe that the bold steps being undertaken will enable it to get back on track,” the IMF and EU bosses added.

They said three “strong pillars” of the aid are “pro-growth measures” and job creation especially for Portugal’s youth, “ambitious fiscal measures” to cut spending at a “realistic” pace and restore confidence on markets, as well as action to stabilise Portugal’s financial sector.