Portugal can expect no quick financial fix from Europe, as European Union leaders at their summit this Thursday and Friday are set to delay a decision on how to strengthen their euro rescue fund. That has the potential to sap market confidence and extend the euro zone’s debt crisis.
Definitive decisions on the European Financial Stability Facility (EFSF) appear to have been pushed back to the end of June. This is partly because of politics and partly to tweak the legal structure so national parliaments will not veto it.
Draft documents say that increasing capacity must wait until the leaders formalise the structure of the European Stability Mechanism, a permanent fund that will replace the EFSF in 2013, with an effective capacity of 500 billion euros.
The delay heightens concern that Portugal may soon follow Greece and Ireland in requiring emergency aid from the EU.
Against a backdrop of repeated anti-austerity demonstrations and strikes in Portugal, estimates of how much it might need for a bailout have been in the 60-to-80-billion-euro range.
Negotiations on rescue finance also have the distraction of several EU countries flying warplanes over Libya. Central topics expected at the leaders’ summit in Brussels include the EU’s southern neighbourhood, defining support for Japan and policy questions on the future of nuclear power in Europe.