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Portugal’s Prime Minister rejects second bailout

by CHRIS GRAEME [email protected]

Prime Minister Pedro Passos Coelho again rejected the need for a second bailout for Portugal or an extension in the time limit to pay off the initial €70 billion payment from the European Financial Stability Fund (EFSF).

“We will neither ask for more time nor money to fulfil the programme,” he said at the Prime Minister’s official residence following talks with the Spanish counterpart Mariano Rajoy.

The affirmation was made after an article appeared last week in the Wall Street Journal, which stated that the country could be forced to ask for a second bailout this year if international conditions deteriorate further.

The United States business daily does point out the differences between Portugal and Greece in terms of a relatively broad consensus in parliament and with social partners, as well as a lack of social unrest to now, but highlights that Portugal, like Greece, has not seen improvements in GDP growth rates, which have been consistently revised downwards.

At the joint press conference with the Spanish premier, Pedro Passos Coelho said: “I said it clearly in Parliament and will say it again; we will neither ask for more money nor time to implement the programme” which would be complied with in an “exemplary manner”.

However, within a day of making the statement, the international financial markets showed even greater doubts that Portugal would be able to meet its financial commitments.

Former PS finance minister, Fernando Teixiera dos Santos, said that even if the country complied with the Troika’s demands, if Europe failed to come up with an adequate firewall to calm the ratings agencies, investors and markets, all the hard work would be in vain.  

The notion, widely reported in the international press, that Portugal would need a second rescue package sent interest rates on Portuguese five and 10 year sovereign bonds to new and unsustainable records last week.

According to information from Reuters, interest rates on 10 year bonds hit a new record of 14.819% while five year bonds were demanding 19.274% by the close of trading on Wednesday afternoon last week.

Interest rates on two year bonds also soared to 15.462%.

Earlier this month the ratings agency Standards & Poor’s downgraded Portugal’s credit worthiness to ‘junk’ status.

And a report from the International Institute of Finance (IIF), which represents private creditors in the agreement being hammered out to restructure Greece’s debt, also believed that it was “improbable” that Portugal would be able to return to the markets in 2013 as had been expected.

According to the bailout agreement, Portugal needs to return to the international financial markets by next year if it is to meet a €9 billion debt repayment which matures then.

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