Worthy News: EU says no plans for Portugal aid

Saturday 27 November 2010

EU says no plans for Portugal aid

Proposed austerity measures have proved deeply unpopular in Portugal

European Commission President Jose Manuel Barroso has dismissed reports that Portugal is next in line for a financial rescue package.

Mr Barroso said the reports were "absolutely false, completely false". The Portuguese government has made similar denials.

Speculation that Portugal would follow the Irish Republic in asking for help has been rising this week.

The euro has fallen sharply on fears the Irish debt crisis could spread.

The euro fell one cent against the dollar to $1.3265 on Friday. It has now fallen by almost four cents, or 3%, this week.

A report in the Financial Times Deutschland suggested that some eurozone countries and the European Central Bank were putting pressure on the country to ask for financial assistance.

However, the Portuguese government said the reports were "completely false".

The Portuguese parliament is voting later on billions of euros of proposed austerity measures.

This week's fall in the euro was triggered by the Irish Republic's request for financial assistance last weekend.

It is currently negotiating with the European Union (EU) and the International Monetary Fund (IMF) over a rescue package expected to amount to 85bn euros ($113bn; £72bn).

The Republic will be the second eurozone economy to be rescued, after Greece was granted a 110bn-euro bail-out over the summer.

In order to tackle its high budget deficit, and meet conditions of any loan package, the Irish government unveiled a tough recovery plan on Wednesday, designed to save 15bn euros over the next four years.

However, there are doubts about whether the measures will be passed when parliament votes on the budget next month.

All eyes in the Republic are on the result of the Donegal by-election, due later.

The impending EU/IMF bail-out has failed to calm investors' fears that the Irish debt crisis could spread to other countries with high budget deficits, particularly Portugal and Spain.

Government bond yields - an important indicator of investor confidence - have also risen this week, but were virtually unchanged on Friday.

Portugal will vote later on its own austerity budget, which outlines measures to cut the country's deficit from 7.3% of economic output this year to 4.6% in 2011.

It proposes public spending cuts and raising VAT - measures that have proved very unpopular with voters.

This article is from the BBC News website. � British Broadcasting Corporation, The BBC is not responsible for the content of external internet sites.