Econintersect: Portugal’s Prime Minister made a television address Wednsday night (April 6, 2011) to announce that the country had requested aid from the recently expanded bailout fund. PM José Sócrates said, “I had always considered outside aid as a last recourse scenario. I say today to the Portuguese that it is in our national interest to take this step.” According to Business Insider, Sócrates said the decision was “inevitable.” The inevitabilty was punctuated by the 12-month government bond auctionWednesday that required yields of 5.9% to place the issue. The EU/IMF (European Union / International Monetary Fund) will loan Portugal money at 5.7% for five years.From The New York Times:
Though the financial markets and European officials have long expected Portugal to apply for aid, the speed with which things moved Wednesday appeared to take officials in Brussels by surprise, leaving the timetable unclear.
Assuming the Portuguese government has an agreement with the opposition on the need for a rescue, European Union can start negotiating the tough conditions that will be attached to one.
If the pattern of previous bailouts is repeated, a team of officials will be sent to Lisbon to discuss the terms, which will then need to agreed upon by European finance ministers, but that will probably not happen for several weeks.
In a statement late Wednesday the president of the European Commission, Jose Manuel Barroso, said Portugal’s request “will be processed in the swiftest possible manner, according to the rules applicable.”
Mr. Sócrates, who had been governing without a parliamentary majority, resigned last month after lawmakers rejected his latest austerity package. To break the political deadlock, Portugal is set to hold another general election on June 5. In a separate televised address, Pedro Passos Coelho, the leader of the main Social Democratic opposition party, said that he backed the decision to seek outside help.
As reported by GEI News, Sócrates was forced to resign March 25 after the Portugese parliament rejected his budgetary plan to impose austerity in an attempt to avoid the steps taken today. It remains to be seen how austerity imposed by the EU and IMF compares to the proposals that failed to pass Parliament.
While the amount and timing of the bailout request is still not known, GEI News reported on March 25 that a bailout of $107 billion was considered likely.
Sources: Business Insider, New York Times and GEI News here and here
