Portugal and Greece talked up the benefits of Lisbon's decision to accept a multi-billion euro bailout from the European Union and IMF on Wednesday, but the outlook for both countries and Ireland remains highly uncertain. Portugal's caretaker Prime Minister Jose Socrates announced late on Tuesday he had reached preliminary agreement with the EU, IMF and the European Central Bank for a three-year package of support, including help for Lisbon's banks.
-- Portugal PM puts 78 billion euros total on EU bailout
Portuguese government officials said the aid would total 78 billion euros, with 12 billion of that going to Portugal's banks. But a senior eurozone source said the range EU officials were working with was still 75-90 billion euros, depending on how much the banks ended up needing.
The figures are expected to be finalised in talks in the coming days, the source said. The bailout means three of the eurozone's 17 countries are now effectively in financial intensive care - Greece accepted 110 billion euros of bilateral loans a year ago and Ireland signed an 85 billion euro bailout last November - with the long-term fiscal and economic prognosis for all three clouded. Financial markets reacted cautiously but positively to the Portuguese deal, even though key details have yet to be formally announced, including the interest rate on the loans and the precise measures Lisbon must enact in exchange for aid.
Yields on Portuguese government debt fell, with the spread of 10-year government bond yields over German Bunds tightening by around 20 basis points to 675, an indication of lower risk, although it remains at extremely high levels. Socrates, who is seeking re-election on June 5, said he had secured a good deal, although he added: "There are no financial assistance programmes that are not demanding."
Greece, which has raised the possibility of renegotiating elements of its package and which many analysts believe may be forced to restructure its debts despite its bailout, said the aid to Portugal should help settle financial markets. "This agreement will contribute to reducing uncertainties in the markets, which is something all of Europe needs," said government spokesman George Petalotis. But there were less positive noises about the package from other quarters, with Ireland concerned Lisbon may be getting a better deal than Dublin received five months ago.
Portugal's bailout must still be agreed by opposition parties and signed off by eurozone finance ministers at a meeting on May 16. There, Finland, where the anti-bailout True Finns party did well in an election last month, could throw a spanner in the works.
The eurozone has three patients on three different medicine regimes: Greece's loans must be repaid over seven years at an average interest rate of 4.2 percent, Ireland's over seven years at an average rate of 5.8 percent (although it is pushing to change the rate), and Portugal's will be finalised in days.