Lisbon, troika agree details of €78bn bail-out
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The Vasco de Gama bridge near Lisbon: Socrates has won a more lenient schedule for deficit reduction (Photo: F H Mira)
Portugal's caretaker administration has reached an agreement with the troika of the European Commission, the European Central Bank (ECB) and the International Monetary Fund for a three-year €78 billion bail-out.
Prime Minister Jose Socrates made the announcement via televised address after three weeks of negotiations with officials from the international lenders.
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In return for the loan, Lisbon has had to agree to austerity measures similar to those rejected by parliament last month, which precipitated the downfall of Socrates' centre-left minority government and caused snap elections.
The deal will include cuts to pensions, but the minimum wage, health care and schools will be unaffected, according to local media reports. The retirement age will also remain the same.
Crucially, the deal wins a longer period to reach its deficit reduction targets than had previously been envisaged.
Portugal must cut its deficit to 5.9 percent of GDP by the end of 2011, then down to 4.5 percent in 2012 and three percent in 2013. The government's earlier schedule committed to cutting the deficit to 4.6 percent this year, to three percent in 2012 and to two percent in 2013.
It is unclear whether the agreement will include support for the country's banks.
Socrates declared the package a good, but demanding deal. "The government has reached a good agreement that defends Portugal," he said.
"Naturally, there are no financial assistance programs that are not demanding," he continued. "The times we live in continue to imply efforts and a lot of work."
He also said that further pay cuts in the public sector had been ruled out.
Opposition parties have yet to sign off on the deal, however.
The commission and the ECB have insisted that centrist partiesmust back any agreement even though they are in the middle of an election campaign, so that they can be held to its terms whatever the make-up of the future government.
The opposition Social Democrats - political conservatives despite their name - have said they are ready to meet with the troika to consider the package.
However, the latest polls suggest that neither the Socialists of Socrates nor the Social Democrats can win an outright majority, so that the make-up of the new parliament may be little different to the assmebly as it stood befeore th snap vote.
