THE MAIN Portuguese opposition party signalled a tentative willingness yesterday to accept the terms of a €78 billion EU-International Monetary Fund (IMF) bailout as Dublin sought advantage in the debate over the terms of Ireland’s rescue deal.
After talks yesterday with the European Commission, the European Central Bank and the IMF, the chief negotiator for the centre-right Social Democrats said the deal struck late on Tuesday was “influenced” by his party’s proposals and resulted in “better measures” for the Portuguese.
The party’s support for the package comes as it is tipped to take the spoils in next month’s general election. European negotiators went into the talks seeking cross-party agreement on the pact as they do not want to reopen talks after the election.
Caretaker prime minister José Socrates, a Socialist, has argued the deal will be less onerous than the rescue plans agreed for Ireland and Greece, but a commission spokeswoman cast doubt on such assertions. “As it will not have escaped you, we are in a pre-election campaign in Portugal, so when looking at statements made by politicians you have to bear in mind this context,” she said.
The cost of the Portuguese loans has yet to be disclosed but EU leaders have generally backed the trend for lower interest rates in recent months. Bailout interest has been calculated according to a common formula but the fees for Greek loans were cut in March and Ireland was offered a lower rate the same month if it agreed to dilute its corporate tax regime, something Taoiseach Enda Kenny refused to do.
“The Government would be very fed up too if another country was getting a bailout deal better than the terms that we are getting,” Tánaiste Éamon Gilmore said yesterday on RTÉ. He also said the Portuguese rescue would work to the Government’s advantage by widening the crisis to a “more European issue” of economic recovery so that it no longer concerned Ireland alone.
As talks continued in Lisbon yesterday, draft copies of Portugal’s EU-IMF agreement pointed to an acceleration of the government’s privatisation programme. This includes the sale before the end of this year of the state electricity supplier, electricity network and shares in the TAP airline.
The health service is slated for €550 million of cutbacks and education for cuts of €195 million. Unemployment and severance entitlements will be cut, while public sector wages and pensions will be frozen.
The initial market reaction was modest, with Portugal’s 10-year bond yields falling to some 9.95 per cent from a euro-era lifetime record of 10.32 per cent before the deal was struck.
Portugal also faced sharply increased borrowing costs when it raised €1.12 billion in three-month notes at 4.652 per cent.
Euro-zone finance ministers want to sign off on the rescue deal at their regular meeting on Monday week as the country cannot afford to make a €4.9 billion bond redemption due in the middle of next month without external aid.
Officials have pushed for a deal before the June 5th election because the European Financial Stability Facility bailout fund needs three weeks to tap the markets for money to fund the rescue.
