John Lipsky, the second-ranking official at the International Monetary Fund, said facilities exist to help Portugal in case it seeks aid.
“Portugal has not requested any such support but the facilities exist if it were to be needed,” Lipsky said today in an interview on Bloomberg Television’s “Surveillance Midday” with Tom Keene. He said the IMF is in regular contact with Portugal as with other members.
Ireland is in negotiations with the European Union and the IMF after the country’s property crash threatened to topple the banking system. Even though EU leaders say Ireland’s bailout will stem contagion in the euro region, investors are turning their attention to the high budget-deficit nations of southern Europe, led by Portugal.
Lipsky said Spain is a “much larger” country and a “significant” economy that has taken “significant action already” to improve its banking system and fiscal situation.
Ireland’s Nov. 21 decision to request emergency aid from the EU and the IMF fueled a surge in Spain and Portugal’s borrowing costs. The extra yield demanded to hold Portuguese 10- year debt rather than German bunds rose 27 basis points today to 434. The Spanish spread with Germany climbed 27 basis points to 236, a euro-era record. Irish bonds also dropped today.
“Rhetoric alone is not going to solve the problems of Ireland,” Lipsky said as talks continue. He said the Irish crisis is “small and containable” relative to the size of the European economy.
While the Greek crisis was linked to “serious fiscal imbalances” and the Irish issues are more linked to the financial sectors, the “other countries” have been facing a combination of both, he said.
“So far they have been successful in dealing with them,” he said, while acknowledging that market pressures continue.
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