Portugal insists it can meet debt payments

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Portugal insisted Wednesday it will "meet its financial commitments," responding to escalating market fears that it could fail to make its short-term debt payments.

The finance ministry statement came hours after the treasury was forced to offer sharply higher interest rates to raise badly needed fresh funds.

The auction of six- and 12-month bonds "confirmed the deterioration of the financing conditions sparked by the rejection" by parliament of the minority government's austerity plan last month, the statement said.

That vote led to the resignation of Socialist Prime Minister Jose Socrates on March 23. President Anibal Cavaco Silva then on Thursday called early general elections for June 5.

"The current interest rates lead to the conclusion that the damage caused by the rejection of the (austerity) plan is irreparable," the finance ministry said.

But Lisbon "is able to meet its scheduled financial commitments," it added.

It was the first time that the government had said publicly that it could make the debt payments.

Portugal must repay some 4.2 billion euros ($6.0 billion) of debt April 15 and another 4.9 billion euros ($7.0 billion) by June 15.

But the markets increasingly believe that Lisbon will be forced to seek an international bailout, such as those granted to fellow eurozone strugglers Greece and Ireland last year.

They are demanding ever-higher rates of return to provide fresh funds to cover its debt.

© 2011 AFP

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