Portugal avoids default with loan repayment

AP News
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Posted: Apr 15, 2011 6:39 AM
Portugal avoids default with loan repayment

Portugal says it has paid out euro4.2 billion ($6.1 billion) in a bond redemption, avoiding default but further depleting its cash reserves ahead of a promised international bailout.

An official from the Finance Ministry said on condition of anonymity, in line with government policy, that Portugal repaid the maturing loan Friday, as expected.

Portuguese authorities have admitted they don't have enough money to settle a euro7 billion debt falling due in June and have asked for financial help.

Portugal's European partners and the International Monetary Fund have agreed to provide aid which could reach euro80 billion. But negotiations on the loan's terms, especially how much interest Portugal will pay, are likely to take weeks.

The country is facing unsustainable borrowing costs, with its 10-year bond yield reaching 8.9 percent Friday.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

LISBON, Portugal (AP) _ Portugal is having to find euro4.2 billion ($6.1 billion) for a bond redemption, stoking financial pressure on the cash-strapped country which has requested a bailout.

Authorities say Portugal has enough money in reserve to cover the loan repayment Friday. However, they admit the country won't be able to settle other debts in June.

Portugal's European partners and the International Monetary Fund have agreed to provide a financial rescue package which could reach euro80 billion.

But negotiations on the terms of that loan, especially how much interest Portugal should pay on it, are likely to take weeks.

The bailout pledge hasn't defused market tension, with the country's 10-year bond yield reaching an unsustainable 8.9 percent Friday.