Portugal and the European Commission denied a report today that euro zone countries and the European Central Bank were putting pressure on Lisbon to seek a bailout.
European Commission president Jose Manuel Barroso, a former Portuguese prime minister, said there was no talk of a bailout for his home country.
"I can tell you that it's absolutely false, completely false," he said in Paris, adding that an aid plan for the country had neither been requested nor suggested.
Parliament was in session to address the budget. The Financial Times Deutschland reported today that a majority of euro zone countries and the European Central Bank were pressing Portugal to follow Ireland and Greece and seek aid from the European Union and International Monetary Fund.
"This news article is completely false, it has no foundation," said a Portuguese government spokesman. Lisbon is preparing to pass an austere 2011 budget that it hopes can deliver tough spending cuts to ward off the euro zone debt crisis.
Economists have said Portugal is the likely next euro zone country to need a financial rescue as it struggles with low competitiveness and a high budget deficit.
"The market is now assuming a bailout for not just Portugal but also Spain, but it is moving slowly with the officials reluctant to concede it will happen," said Peter Chatwell, a rate strategist for Credit Agricole in London.
Mr Chatwell said the "the market does not really see a timeline for this," adding that pressure will continue in debt markets.
"There is no announcement expected this weekend." Prime minister Jose Socrates has repeatedly denied that his country needs a bailout and has underlined that Lisbon will do everything possible to meet goals to cut the budget deficit.
Finance minister Fernando Teixeira dos Santos said in an interview with the daily Jornal de Noticias that some countries in the euro zone think the best way of defending the euro is to push countries to seek aid.
"I don't want to refer to this or that country, much less Germany," Mr Teixeira dos Santos told the newspaper when asked if Germany was leaning on Portugal to ask for aid.
"But there (are) among our partners in the European Union those that think that the best way of preserving stability in the euro area is to push and force those countries that have been in the spotlight to seek aid," he said. Ireland's government resisted seeking aid initially until it decided last weekend to go to Brussels.
The Portuguese government aims to cut the deficit to 4.6 per cent of gross domestic product next year from 7.3 per cent this year.
Still, Portugal's risk premiums, measured by its 10-year bond yields compared to safer German Bunds, hit record highs this week as concerns rose after Ireland sought a bailout. The spread rose 10 basis points to 464 basis points today, leaving it short of the record high of 481 basis points.
The country's PSI20 stock index slid 0.67 per cent with banks leading the decline.
Lisbon has still been targeted by investors as possibly needing a bailout because of its spiralling debt costs. Portugal's parliament prepared to approve today an austere 2011 budget that aims to deliver tough spending cutbacks and tax increases that are central to the country's efforts to ride out the euro debt storm.
The minority Socialist government's budget is virtually guaranteed to pass thanks to support from the opposition Social Democrats, concluding many months of political bickering which at one point threatened the government's survival.
Reuters