UK 'reluctant' to bail out Portugal

Chancellor of the Exchequer George Osborne said today Britain is a "reluctant participant" in an EU bailout for Portugal.

The United Kingdom may have to contribute up to £4 billion to a European Union rescue fund for Portugal.

Mr Osborne insisted there no question of Britain offering  Portugal or Greece a bilateral loan, as it did with Ireland.

"I can't see us ever writing a cheque directly from the British tax payer to the Greeks, Portuguese or anyone else - Ireland was a special case," Mr Osborne said in an interview on BBC TV's Andrew Marr Show. "I don't think it's inevitable the Greeks are going to default."

Mr Osborne said EU finance ministers' plan for Greece might involve additional funding from the euro zone. "It's inevitable that we're going to look at the Greek package and see what they can do to get through next year," he said.

The chancellor said he had not heard suggestions that Greece might leave the euro "in private or in public, I promise you".

Yesterday, Greek prime minister George Papandreou denied there was even unofficial discussion over Athens quitting the euro zone and asked that his troubled country be "left alone to finish its task".

Ministers from the euro zone's biggest economies met in Luxembourg to discuss Greece's debt crisis on Friday but Athens and senior EU officials denied a report by Germany's Der Spiegel Online that the Greek government had raised the prospect of leaving the 17-member euro zone.

"These scenarios are borderline criminal," Mr Papandreou told a conference on the Ionian island of Meganisi. "No such scenario has been discussed even in our unofficial contacts...I call upon everyone in Greece and abroad, and especially in the EU, to leave Greece alone to do its job in peace."

Luxembourg prime minister Jean-Claude Juncker, head of the group of euro zone finance ministers, said it was an "informal meeting". He said there was a broad discussion of Greece and other international economic issues but said the idea of exiting the euro was stupid.

"We have not been discussing the exit of Greece from the euro area. This is a stupid idea. It is in no way - it is an avenue we would never take," he told reporters after the meeting attended by ministers from Germany, France, Italy and Spain.

"We don't want to have the euro area exploding without reason. We were excluding the restructuring option, which is discussed heavily in certain quarters of the financial markets," he added.

But he said a meeting of all euro zone finance ministers on May 16th would discuss whether Greece needed a further economic plan. The EU is currently negotiating a bailout with Portugal, the third state it is rescuing after Greece and Ireland.

Despite a €110 billion international bailout, Greece, a euro zone member since 2001, has not cut its budget deficit as fast as it promised its lenders amid a deep recession. Gains from spending cuts and tax hikes have been partly erased by low revenues due to tax evasion and a deep recession.

Financial markets have been sceptical for months that Athens could manage its huge debt without eventually restructuring. As austerity bites, even some ruling socialist party politicians have been suggesting a "soft" restructuring which might involve lengthening maturities on the country's bonds.

PA/Reuters