Portugal raises $1.4 billion at debt auction

AP News
Posted: Apr 20, 2011 7:56 AM
Portugal raises $1.4 billion at debt auction

Portugal raised euro1 billion ($1.4 billion) at a short-term debt auction at higher interest rates as it negotiates terms of a badly needed bailout to avert bankruptcy.

The government debt agency said it sold euro680 million in 3-month bills at an average interest rate of 4 percent, up from 3.7 percent at the last such auction in January. Demand for the debt was double the amount sold.

The agency also sold euro320 million in 6-month bills at an average rate of 5.5 percent, up from 5.1 percent on April 6. It was 3.7 times oversubscribed.

Portugal requested a bailout this month as it struggles with a mountain of debt and years of sluggish economic growth. Delegations from the European Commission, the European Central Bank and the IMF have been in Lisbon since Monday to start negotiations on terms of the rescue _ in particular the interest rate. The bailout could amount to euro80 billion.

The delegations were meeting Wednesday with Portuguese business leaders, after conferring Tuesday with unions, which came out of the talks sounding feisty about austerity-oriented strings that would almost certainly come attached to the bailout package.

Joao Proenca, leader of the General Union of Workers, said late Tuesday that the visiting lenders did not give an amount of how much the bailout might total.

"We asked questions that are essential for us," he told reporters.

Proenca said future sacrifices needed to cut Portugal's deficit "are linked to social justice" and should not pose further hardship for poor people, workers who earn low wages or pensioners.

Portugal has already implemented several series of austerity measures and opposition parties' rejection of the latest one prompted Prime Minister Jose Socrates to tender his resignation on March 23. He now leads a caretaker government, with elections due in June.

The bailout talks are expected to take several weeks.

Portugal is eight weeks away from possible bankruptcy. Officials admit they won't have enough money to settle a euro7 billion debt falling due mid-June and have asked for financial help amid a cash crunch that is threatening the provision of basic services. The country is weathering unsustainable costs on loans to finance its economy.


Associated Press writer Daniel Woolls and Harold Heckle contributed to this report from Madrid.