Thursday, April 07, 2011

Another one bites the dust…


Portugal’s announcement that it too will tap the EU/IMF bail-out fund comes as no surprise. As we’ve argued many times before, it was merely a question of time. The announcement has however send eurozone hawks into a tailspin as questions over the amount, timing and conditions remain to be answered. Here’s some leaks picked up from the Portuguese press and elsewhere.

The size of the bail-out is expected to fall between €70bn to €90bn. Jornal de Negócios today reports that Jean-Claude Juncker says €75bn could be “appropriate”. Similar figures have been flying around for some time though. The Portuguese papers are somewhat less conservative, with many papers citing Diário Económico's estimate that the figure could rise to €90bn.

Público report that Guy Schuller, a Spokesperson for Jean-Claude Juncker says that technically there is no reason why some of the bail-out cannot arrive before the elections. This is also backed up by a European source close to tomorrow’s ECOFIN meeting who is cited in Dow Jones saying, “It will be difficult to concede a total package to a caretaker government” but “part of the resources could arrive before the elections”. “The preliminary technical work for the case of Portugal has already been done”, making it possible to issue the resources with “great speed”, claims the source.

The bail-out news has received a mixed response within Portugal, President Anibal Cavaco welcomed the move, announcing his support for caretaker PM José Sócrates and calling for “an attitude of responsible cooperation from the opposition parties”.

Opposition leader Pedro Passos said he supports the move, claiming it’s a way “to guarantee the national security and to preserve the reputation of Portugal abroad”. However, Reuters quotes a senior EU official who said that “the conditions demanded by Brussels are going to be very similar to the measures of the PEC, rejected in March by Parliament”. The same conditions which Passos so vehemently opposed just two weeks ago.

A Portuguese government source confirmed today that a bail-out will only be arranged with the support of the opposition. The National Federation of Trade Unions for the public sector will hold a strike on 6 May under the guise of getting “the IMF out of Portugal”, reports Diário Económico.

Meanwhile, the President of the Portuguese Banking Association has said that the ECB gave “clear instructions” to the banks to reduce their exposure to the government and other public sector bodies.

1 comment:

Rollo said...

Bail-out is the wrong description. It should be a 'temporary loan to delay default'.