Portugal Facing ‘Difficult Situation,’ IMF’s Atkinson Says

Portugal is facing a “difficult situation,” and authorities will need to sustain efforts to narrow the country’s budget deficit, an International Monetary Fund spokeswoman said.

“We have had no request for financial assistance from Portugal,” IMF director of external relations Caroline Atkinson told reporters in Washington today. The commitments made by the government to improve public finances and promote growth “are important steps that will need to be continued.”

Portugal today reported a budget deficit of 8.6 percent of gross domestic product last year, missing a government target of 7.3 percent and causing a jump in borrowing costs that increases the risk of a bailout.

Authorities been raising taxes and implementing the deepest spending cuts in more than three decades, aiming to convince investors it can narrow its budget gap, curb its debt and avoid following Greece and Ireland in seeking a bailout.

Asked about Spain, Atkinson said that “strong measures” taken by the government on the fiscal side as well as on its labor market were important and have “also seem to have borne some fruits in the markets and there seems to be a belief that Spain’s fundamentals are definitely moving in the right direction.”

Atkinson said the IMF remains concerned about the debt and deficits in the U.S. and that some actions may be needed in the short term to improve the medium-term fiscal position.

An IMF technical team went to Tunisia recently and one is going to Egypt in the next few days, she said. In both cases, the aim is to discuss the economic prospects, not to negotiate financial aid, she said.

To contact the reporter on this story: Sandrine Rastello in Washington at srastello@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at Washington at cwellisz@bloomberg.net

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