Portugal has revealed that it now needs financial aid from the European Union.
The news came in the form of a televised evening address to the nation from Prime Minister Jose Socrates. Mr Socrates announced: “I want to inform the Portuguese that the government decided today to ask…for financial help, to ensure financing for our country, for our financial system and for our economy.”
The country’s finance minister, Fernando Teixeira dos Santos was also present at the meeting and added: “It is necessary to resort to the financing mechanisms available in the European Union.”
Portugal is a country plagued by financial troubles and has now followed two other troubled countries, Greece and Ireland’s lead in asking for help from Europe. Portugal is asking for aid from Europe’s bailout reserve and the International Monetary Fund.
It is thought that Portugal will require up to €80bn (£69.6bn) in order to get them out of trouble according to analysts. This amount compares to the aid received by Ireland which was €85bn and Greece’s €110bn bailout.
Portugal has been trying to get itself out of a financial hole and earlier on Wednesday had bought itself more time as it managed to raise a further €1bn (£880m) cash via short-term debt funding. Despite this achievement the caretaker government warned that the political turmoil that is ongoing in the country had wreaked “irreparable” damage.
The financial problems of Portugal are ongoing as the nation has had to pay investors high rates of return in order to take up government bonds due to be repaid in six and 12 months, and this was the second bond auction in less than a week. Analysts showed that the average yield earned by investors on the 12 months debt came in at 5.9pc. The six-month debt had an average return of 5.1pc.
Portugal was already experiencing high borrowing costs, even before the government collapsed last month. However, the resignation of Jose Socrates, the prime minister, after his latest bout of austerity measures designed to keep a bailout at bay were rejected by parliament, triggered a run of downgrades of Portugal’s debt by most credit rating agencies.
References:
The Wall Street Journal
Financial Times
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