Portugal austerity vote looms

 

ATHENS – Portugal will likely seek a
bailout from its European Union partners and the International Monetary Fund by
June at the latest, according to a senior official at a euro-zone government.

The request for help could some
within the next few weeks if opposition parties vote down a new set of measures
designed to cut the budget deficit.

That vote takes place Wednesday,
and Prime Minister Jose Socrates has said he will quit if the new austerity
package is rejected.

The governments of Greece and
Ireland have already been forced to seek help from the EU and IMF when it
became too expensive for them to borrow from bond investors, and Portugal’s
borrowing costs have been rising steadily in recent months.

“The majority of the euro zone
is all but convinced that Portugal will follow Greece and Ireland in seeking in
bailout.

Many believe it will happen in
April which could well be the case.

My opinion is that they could stay
above water until June at the latest as it very difficult for them to turn
around market sentiment,” the official, who is directly involved in
euro-zone talks, said.

The rise in borrowing costs would
be further aggravated if the government is defeated Wednesday.

Portugal’s two largest opposition
parties, which together have over 100 representatives in Parliament from a
total of 228, have already said they will vote against the measures.

Socrates’ party has 97
representatives.

“The government continues to
think international aid won’t be necessary as it continues to show it can meet
its budget deficit targets for the next few years,” a Portuguese government
official said.

“That said, if the opposition
shuts down the new austerity measures on Wednesday, the country might have no
option but to ask for help,” the official said.

Portugal’s financing path looks
increasingly difficult. It must repay EUR $6 billion in April and $6.9 billion
in June after three buy-back auctions that reduced the outstanding amount of
these two lines by only $480 million.

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