5th Mar 2024

Core EU states put squeeze on Portugal to accept bail-out

  • Portuguese leader Jose Socrates and German Chancellor Angela Merkel at the EU Council (Photo: consilum.europa.eu)

Major European powers are putting the squeeze on Portugal to follow Greece and Ireland and knock on the doors of EU and IMF bail-out resources.

Reports over the weekend quote senior European sources as saying Berlin, Paris and other core eurozone capitals are leaning heavily on Lisbon to apply for a financial rescue, although the Portuguese government continues to deny that any pressure is being mounted.

Read and decide

Join EUobserver today

Get the EU news that really matters

Instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

The news comes as Portugal is set to go to the markets on Wednesday (12 January) with a fresh government debt offering of €1.25 billion.

All eyes will be monitoring the sale this week, as any indication that capital markets have abandoned the country will be seen as the final straw before Lisbon is forced to seek external financial assistance.

"France and Germany have indicated in the context of the Eurogroup that Portugal should apply for help sooner rather than later," an unnamed senior EU source was quoted by Reuters on Sunday as saying.

Reports out of Germany also say Lisbon is under pressure from Berlin and Paris.

The Reuters source added that discussions on a possible Portuguese bail-out by the EU and IMF have been taking place since July last year and that Finland and the Netherlands were also of the opinion that it is time for Portugal to admit defeat.

The eurozone core fears that if a firewall is not built around Portugal, investor nervousness could spread to Spain, a much larger economy than those of the two states - Greece and Ireland - that have already been bailed out.

However, formal negotiations with Lisbon have yet to begin, the source continued, and discussions have yet to match the pace of similar talks ahead of the Greek bail-out last May or that of Ireland last November.

Should Portugal decide to ask for a rescue, the bill would amount to between €60 and €80 billion, the source said.

On Friday, the Portuguese 10-year bond yield climbed to an all-time eurozone history high of 7.193 percent, a sharp jump up from the 6.957 percent demanded by investors the day before.

On Tuesday, the government managed to raise €500 billion in six-month treasury bills but only by forking out a record 3.686 percent, up from 2.045 percent for the previous such auction.

Lisbon for its part insists that the government is under no pressure, with a government spokesman on Sunday saying the reports were untrue.

"This story has no foundations, it is false," the spokesman said.

Berlin also denied the reports.

"It is not the strategy of the German government to push Portugal to take the bailout," said government spokesman Steffen Seibert.

Lisbon argues that its stringent austerity measures have met with success in cutting its budget deficit, meeting its deficit target for 2010 of 7.3 percent of GDP, down from 9.3 percent in 2009.

Adding to the country's woes, on Friday, the Swiss central bank said that it had stopped accepting Portuguese government debt as collateral, a move that follows a similar downgrade of Irish debt.

EU supply chain law fails, with 14 states failing to back it

Member states failed on Wednesday to agree to the EU's long-awaited Corporate Sustainable Due Diligence Directive, after 13 EU ambassadors declared abstention and one, Sweden, expressed opposition (there was no formal vote), EUobserver has learned.

Angry farmers block Brussels again, urge fix to 'unfair' prices

Following weeks of demonstrations across Europe, farmers returned to Brussels to protest over unfair competition in prices, as EU agriculture ministers met just a few metres away to discuss a response. The police used water cannon and tear gas.

EU's €723bn Covid recovery fund saw growth, but doubts remain

The €723bn Covid-19 recovery fund, launched three years ago, has been a success, according to a mid-term internal review — but less effective than initially predicted. And according to one NGO, the commission painted an "overly positive picture".


The six-hour U-turn that saw the EU vote for austerity

The EU's own analysis has made it clear this is economic self-sabotage, and it's politically foolish three months from European elections where the far-right are predicted to increase support, writes the general secretary of the European Trade Union Confederation.


Why are the banking lobby afraid of a digital euro?

Europeans deserve a digital euro that transcends the narrow interests of the banking lobby and embodies the promise of a fairer and more competitive monetary and financial landscape.

Latest News

  1. EU must overhaul Africa trade offer to parry China, warns MEP
  2. EU watchdog faults European Commission over Libya
  3. Hungary's Ukrainian refugees in two minds as relations sour
  4. The six-hour U-turn that saw the EU vote for austerity
  5. Defence, von der Leyen, women's rights, in focus This WEEK
  6. The farming lobby vs Europe's wolves
  7. EU socialists fight battle on two fronts in election campaign
  8. EU docks €32m in funding to UN Gaza agency pending audit

Stakeholders' Highlights

  1. Nordic Council of MinistersJoin the Nordic Food Systems Takeover at COP28
  2. Nordic Council of MinistersHow women and men are affected differently by climate policy
  3. Nordic Council of MinistersArtist Jessie Kleemann at Nordic pavilion during UN climate summit COP28
  4. Nordic Council of MinistersCOP28: Gathering Nordic and global experts to put food and health on the agenda
  5. Friedrich Naumann FoundationPoems of Liberty – Call for Submission “Human Rights in Inhume War”: 250€ honorary fee for selected poems
  6. World BankWorld Bank report: How to create a future where the rewards of technology benefit all levels of society?

Join EUobserver

EU news that matters

Join us