Portugal says passes third creditor review

Portugal has passed a third review by creditors of budget action in return for 78 billion euros ($105 billion) rescue last year, the finance minister Vitor Gaspar said on Tuesday.

“This positive result illustrates our capacity to apply a demanding programme despite a defavourable context,” Gaspar told a press conference.

He was speaking after an audit by officials from the European Union, European Central Bank and International Monetary Fund.

“After three regular reviews concluded succesfully and four transfers (of funds), we will have received 48.8 billion euros from our international partners, including 4.3 billion euros set aside to recapitalise banks,” the minister said.

Gaspar however lowered the country’s growth forecast for 2012 to 3.3 percent from 3.0 percent, putting the outlook in line with that seen by the European Commission.

Lisbon received the rescue in May 2011 in return for a series of tough austerity measures to slash public spending and increase revenues.

The austerity programmes have however slowed the economy and in recent weeks speculation had grown that Portugal may need more help, driving up its borrowing rates.

Earlier this month ratings agency Moody’s said that Europe’s weakening economic prospects “threaten the implementation of domestic austerity programmes and the structural reforms that are needed to promote competitiveness (in Portugal).”

Towards the end of last year there was acute concern on financial markets that the dire state of finance in Greece could cause so-called contagion, pushing Portugal, Spain and Italy into deep trouble and spreading crisis throughout the eurozone.

In the last few days the pieces of a complex package to avert default by Greece have fallen into place, relieving concerns of contagion.

The outcome of this third review of Portuguese reforms in return for rescue funding also bolsters the improved outlook for weak eurozone countries.