Portugal to end bailout with clean chit

May 06, 2014 - 1:17:01 am
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LISBON: Portugal decided to make a clean break from its EU-IMF bailout, following in the footsteps of Ireland by forgoing a credit line as it prepares a full return to the credit markets.

The decision, made during an evening Cabinet meeting, came after the country passed the final bailout audit by EU-IMF experts on Friday, thereby closing out the essential part of its €78bn three-year rescue. “The government decided that we will exit our rescue programme without resorting to any precautionary programme,” Prime Minister Pedro Passos Coelho said during a television broadcast following the meeting surrounded by his ministers.

The decision was the “best for the interests of Portugal” after the country “regained its credibility”, he added.

It was applauded by the European Commission, which said it would “support the government and the Portuguese people”.

Christine Lagarde, the head of the International Monetary Fund, said the decision meant “Portugal is now able to complete the consolidation of public finances”.

Portugal is now set to emerge from the bailout on May 17, and is expected to try to finance itself on bond markets without a so-called safety net, becoming the second stricken eurozone country to do so after Ireland.

Portugal made the decision while still enacting the latest round of severe measures to keep its public finances within targets laid down by the International Monetary Fund, European Union and European Central Bank.

Rafts of reforms tied to rescue loans pushed the country into recession and the people into severe hardship, with cuts in pay, pensions and public services.

The auditors, who began their last audit of progress on reforms on April 22, finished their work late on Thursday after marathon negotiations. Their approval of the national accounts and progress opens the way for the release of the last payment of €2.6bn of the total rescue package of €78bn ($108bn) extended in May 2011.

By following the example set by Ireland, Portugal will now proceed to issue bonds without having the back-up of a precautionary line of credit. Passos Coelho said the government had enough funding reserves to protect itself from at least a year of financial turbulence. The head of the eurozone finance ministers group congratulated Portugal yesterday on its exit from a massive debt-rescue but said it must hold to promised reforms to realise its potential.

“I would like to congratulate Portugal,” Dutch Finance Minister Jeroen Dijsselbloem said as he went into a meeting with his eurozone colleagues.

“They have done a lot of hard work ... and are now coming out strongly,” Dijsselbloem said. “There is still lot of work to be done but if they (stick with reforms), then they have great potential,” he added. The Portuguese finance minister is due to brief his counterparts later on Lisbon’s precise plans. AFP

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