Portugal EU/IMF creditors approve bailout review, goals unaltered

Thu Oct 3, 2013 3:26pm EDT
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By Sergio Goncalves and Daniel Alvarenga

LISBON (Reuters) - Portugal's international lenders approved the country's performance under a bailout in their latest review on Thursday, but rejected government requests to ease fiscal goals.

The European Union and International Monetary Fund said Lisbon was moving to meet the lending program's goals and that there were early signs of recovery after the worst economic downturn since the 1970s.

"The program remains broadly on track, with the authorities determined to achieve its objectives," the lenders said in a statement.

"Provided the authorities persevere with steadfast program implementation, euro area member states have declared they stand ready to support Portugal until full market access is regained."

With no change in next year's budget deficit goal, the government is set to push ahead with spending cuts of 4 billion euros ($5.5 billion) next year, which are likely to be detailed in the draft budget to be presented later this month. Business groups have argued these cuts could compromise a fledgling recovery.

The first signs of economic growth prompted the government and creditors to raise next year's growth forecast to 0.8 percent from 0.6 percent. This year's gross domestic product (GDP) contraction is now seen at 1.8 percent compared with the previous estimate of a 2.3 percent decline.

Portugal's 78-billion-euro bailout is due to expire in mid-2014 but many economists expect that the country will continue to need some form of aid after that, possibly through a precautionary loan program from the European Union.

Finance Minister Maria Luis Albuquerque said Portugal would not rule out bond issues this year and the goal was to resume regular issuance in 2014.   Continued...

A woman pulls a shopping bag as another waits for a bus in downtown Lisbon July 11, 2013. REUTERS/Rafael Marchante