Portuguese bailout pressures

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Portuguese bailout pressures

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Euro currency leaders have a tense few weeks ahead of them, watching Portugal. The EU summit deferred until June final decisions on increasing the size of their temporary debt crisis rescue fund.

But the head of the euro zone finance ministers council, Jean-Claude Juncker, said: “If Portugal needs help, we have enough.”

Prime Minister Jose Socrates, who resigned on Wednesday after parliament in Lisbon threw out austerity measures aimed at avoiding a bailout, put a brave face on things.

Socrates said: “Portugal doesn’t need a bailout plan, and I will maintain that position in defence of my country because I know what it meant for Ireland and Greece, and I don’t want the same thing to happen to my country.”

Paris said it will be left up to the Portuguese authorities to decide what to do, but Berlin is putting pressure on Lisbon.

German Chancellor Angela Merkel said: “Where Portugal is concerned, it’s like this, and I’ve already said it several times: not only the government but the opposition as well must be clear about the deficit reduction goals from now to 2013, and also about how they propose to achieve those objectives.”

Portugal has a heap of debt maturing soon, and suspense is high waiting to see how the markets will react on Monday to its increasing weakness.

Our correspondent in Brussels explained that upcoming elections in Finland put the stabilisation fund question off. Helsinki can not sign off on it till a new government is in place there. But the EU states have made progress on the permanent fund set to come into being in 2013.

With Lisbon widely expected to seek help, attention could shift to Spain, which holds one third of Portugal’s public debt. An IMF source said contagion and global uncertainty could trigger a wave of borrowing from the fund.