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EU says Portugal needs about $114 billion in aid

AP

By GABRIELE STEINHAUSER and PABLO GORONDI

GODOLLO, Hungary – Europe’s top financial officials said Friday that Portugal will need around euro80 billion ($114 billion) in rescue loans, but a tense election campaign in the debt-ridden country is set to complicate reaching a deal with opposing political parties.

A full-fledged adjustment program should be in place by mid-May, allowing the debt-ridden country to meet huge bond repayments in June, the EU’s Monetary Affairs Commissioner Olli Rehn said.

Rehn said that the program would have to be agreed by all major political parties, to ensure that it will be implemented after elections in early June, which will likely heave the opposition into power.

International Monetary Fund Director Dominique Strauss-Kahn said Friday that IMF had received a request for financial assistance from the Portuguese authorities, and was prepared to move “expeditiously” and hold “swift discussions” with the government.

However, Portugal’s acting Finance Minister Fernando Teixeira dos Santos quickly thwarted hopes of cooperation between the opposing political forces, saying the caretaker government will not talk directly to the opposition and that any talks would have to be led by the European authorities and the IMF instead.

“The negotiations are not the government’s responsibility,” Teixeira dos Santos told reporters after meeting his European Union counterparts in Godollo, a small town just outside Hungary’s capital, Budapest.

Portugal this week became the third country in the eurozone to request international help, after last year’s multibillion rescue packages for Greece and Ireland from the EU and the IMF.

While a rescue of Portugal had long been anticipated and its cash needs can easily be met by Europe’s existing financial backstops, the country’s political situation makes reaching a final deal more difficult.

Prime Minister Jose Socrates resigned late last month after opposition parties rejected unpopular spending cuts and tax increases that the government said were necessary to get the country’s struggling economy back on track.

EU finance ministers said Friday that the economic adjustment program that accompanies the rescue loans will have to go beyond the measures rejected by the opposition.

Rehn urged the different political parties to “realize their major responsibility of overcoming the current difficulties.”

More here:

http://news.yahoo.com/s/ap/20110408/ap_on_bi_ge/eu_europe_financial_crisis