EU official sees Portugal deal in coming days

AP News
Posted: May 02, 2011 12:02 PM
EU official sees Portugal deal in coming days

A preliminary deal on an international bailout for Portugal is likely to be announced in the coming days, a European Union official said Monday.

Experts from the EU's executive Commission, the International Monetary Fund and the European Central Bank who are currently in Lisbon are close to agreeing on the fiscal and economic adjustment program that will accompany the rescue loans, the official said. He was speaking on condition of anonymity because discussions are still under way.

Portuguese newspapers have said a deal will be announced Wednesday, but the official said he was "not so optimistic" it will happen then.

He said the timing will depend on all major parties in Portugal, which is in the middle of an acrimonious election campaign, endorsing the deal.

The rescue package _ which will likely contain some euro80 billion in loans _ faces a difficult path because of the tricky political situation in Portugal and growing opposition to bailouts in more prosperous eurozone countries.

Portugal's Prime Minister Jose Socrates resigned in late March after opposition parties refused to back further austerity measures he said would save his country from seeking international help.

Investors reacted to the resignation by dumping the country's bonds and Socrates requested a bailout from other eurozone governments and the IMF less than two weeks later.

Because opinion polls suggest opposition parties are likely to gain power in June elections, eurozone finance ministers have insisted that any bailout program has to be endorsed by all major parties to avoid an ensuing renegotiation _ a difficult task with politicians vying for votes.

But the internal political situation in Portugal is not the only hurdle for the bailout deal.

Elections in Finland last month showed big support for the euro-skeptic True Fins party, which has opposed spending any more money on bailing out weaker eurozone countries. With negotiations still under way in Helsinki _ and the True Fins likely to form part of a new government _ doubts have grown that Finland will be able to endorse the bailout by mid-May, as was originally planned.

Jyrki Katainen, Finland's current finance minister and likely new prime minister, has said that he expects his country to support Portugal, but that changes to the program may be required.