Portuguese Prime Minister Jose Socrates’s resignation “complicates” the process of securing any potential international rescue package, said William White of the Organization for Economic Cooperation and Development.
“I’m sorry he had to resign, because it’s going to complicate the issue,” White, chairman of the OECD’s Economic and Development Review Committee, said in an interview with Deirdre Bolton on Bloomberg Television’s “Inside Track” today. “If there is going to be funds provided to the Portuguese to ease the adjustment in the context of conditionality, the question is who does the negotiation if there isn’t even a government? That is going to make things a bit tricky.”
Portuguese borrowing costs rose to the highest level since the euro’s inception in 1999 after the country’s parliament rejected budget-cutting measures yesterday, pushing the nation closer to a bailout and prompting Socrates to resign. European leaders meet in Brussels today to sign off on measures aimed at drawing a line under the region’s sovereign-debt crisis.
If Portugal does “move down the road to saying ‘We do have a problem, we do need support,’ help from the Europeans and from the International Monetary Fund, that would be a welcome step,” White said from Paris.
“The concern that the markets have is that this is not a problem of short-term liquidity, but rather that the debt-servicing requirements of some of these countries -- Greece and Ireland -- is so great that it seems almost inevitable to the market participants that there will be a degree of social and political tension that will call into question that debt servicing over time,” he said.