Portugal starts bailout talks; deal seen

April 13, 2011 - 0:0

LISBON (Reuters) - Portugal starts negotiations on Tuesday with European authorities and the IMF on a bailout that could reach 80 billion euros (71 billion pounds) to salvage its indebted economy as politicians jostle ahead of a general election campaign.

Officials from the European Commission, European Central Bank and IMF will pore over Portugal's public accounts to decide on extra austerity measures they deem necessary for Lisbon to reduce its budget deficit in return for a three-year loan.
Portugal's crisis entered a critical phase when its minority Socialist government resigned last month after parliament rejected its latest austerity plan. That led to multiple downgrades of Portugal's creditworthiness and a sharp rise in borrowing rates, making it prohibitively expensive for the country to continue borrowing in debt markets.
Newspapers splashed the bailout talks in their Tuesday editions, with many drawing comparisons with the last time the country was under IMF tutelage in the early 1980s, which brought harsh austerity.
""IMF forecasts that Portugal will be the only country facing crisis in 2012,"" said daily Diario de Noticias in its headline.
The country's bond spreads were flat on Tuesday.
Economists had seen a bailout for Portugal, following on from Greece and Ireland, as almost inevitable. But the government only caved in after it failed to get its latest measures through parliament after resisting foreign aid for months.
Now, the negotiations will be complicated by the fact that a snap general election is scheduled for June 5 and all parties want to avoid blame for the bailout.