Portugal bail-out to cost Britain £3b
It is estimated Portugal may need as much as 80bn euros (£70bn) over the next three years, much of which is expected to come from the EU’s temporary emergency fund of 440bn euros.
Britain is tied into contributing to that fund until 2013 and has already pledged £7bn to support Ireland.
Prime Minister Jose Socrates said the call for EU help was “inevitable” after parliament rejected additional austerity measures last month.
“I tried everything, but in conscience we have reached a moment when not taking this decision would imply risks that the country should not take,” he said.
Debt-straddled Portugal had for months resisted increasing pressure to apply for help from the European Union (EU) and the International Monetary Fund (IMF).
But its borrowing costs reached unsustainable levels after the collapse of the government on March 23. A general election is to be held on June 5.
Portugal is the third country in the eurozone to seek help after Greece and Ireland.
Sky’s Sophy Ridge said: “In some ways the markets were already expecting Portugual to need a bailout – it may not have the same effect as countries such as Greece and Ireland when they were bailed out.
“This actually helps the coalition Government to justify the tough austerity measures that it’s taking, because the reason Portugal is in this situation is the government voted down the very tough savings that needed to be made.”
Eurozone officials have said Lisbon is likely to need between ?60bn (£52.6bn) and ?80bn (£70.2bn) in EU and IMF loans over the next three years.
The European Commission’s top economic official, Olli Rehn, said a bailout was in the interest of the 17-nation single currency zone.
Larry Kantor, global head of research at Barclays Capital, also welcomed the development.
“The sooner they get the assistance and we establish this, the sooner we’ll get more stable markets there,” he told Jeff Randall Live.
Source: Sky News