Portugal settles €78bn bailout deal

Acting prime minister José Socrates says Portugal must slash its deficit from 9.1% to 5.9% this year under terms of deal Portugal’s caretaker government said that it had negotiated a €78bn bailout deal with the European Union and the International Monetary Fund, but was waiting for opposition parties to agree. Acting prime minister José Sócrates said that, under the terms of the deal, Portugal must slash its budget deficit from 9.1% to 5.9% this year, and then reduce it to 3% by 2013. “The government has today reached an agreement with the international institutions regarding the financial aid to our country,” Sócrates said in a televised address. “Naturally, there are no financial assistance programs that are not demanding,” he added. “The times we live in continue to imply efforts and a lot of work. Let no one doubt that.” Sócrates said that an austerity programme to bring the deficit down this year would basically imitate the plan which was thrown out by the Portuguese parliament in March, causing president Aníbal Cavaco Silva to call a snap election for 5 June. Two weeks later, Sócrates finally admitted that Portugal would join fellow eurozone countries Greece and Ireland in requesting a bail-out. He said that Portugal had “got a good deal” and that further cuts to civil service pay would not be needed. “We will beat this crisis,” he added. A government official told Associated Press that the €78bn package included aid for Portugal’s cash-strapped banks. The Público newspaper reported austerity measures would include cuts to some, higher-scale state pensions. Basic pension rates and the minimum wage would stay in place as would free schooling and health services, the newspaper reported. The retirement age would not be changed, it added. Sócrates insisted that the bailout package required the country to carry out the same austerity measures rejected in parliament by the opposition centre-right social democrats, who are currently ahead in the opinion polls. Those polls suggest that neither party can win an absolute majority. Publico reported that the social democrats would also have to approve the aid package. “With this agreement the country obtains for the second time, now in different terms, the support and the confidence of the international institutions based on the program that the government presented in March,” Sócrates said. European finance ministers have set a target date of 16 May for the approval of the agreement, and are demanding all main political parties sign off on the terms. IMF Portugal Global economy Europe Economics Giles Tremlett guardian.co.uk

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