The International Monetary Fund approved a 26 billion-euro ($36.8 billion) loan to Portugal as part of a joint bailout with the European Union in the latest effort to stem the region’s sovereign debt crisis.
The Washington-based institution will make 6.1 billion euros available immediately, the fund said in an e-mailed statement today. The IMF followed European officials, who on May 16 endorsed the 78-billion ($110 billion) joint package.
“The Portuguese authorities have put forward a program that is economically well-balanced and has growth and job creation at its center,” Acting Managing Director John Lipsky said in the e-mailed statement today. “It addresses the fundamental problem in Portugal - low growth - with a policy mix based on restoring competitiveness through structural reforms, ensuring a balanced fiscal consolidation path, and stabilizing the financial sector.”
The backing for Portugal comes less than two days after the resignation of Dominique Strauss-Kahn as managing director, who was indicted yesterday in New York on charges including attempted rape. French Finance Minister Christine Lagarde emerged as the leading contender to replace him, with officials including Angela Merkel arguing that a European is needed for the job because of the region’s debt woes.
The loan to Portugal has a duration of three years, the IMF said.
“The financing package is designed to allow Portugal some breathing space from borrowing in the markets while it demonstrates implementation of the policy steps needed to get the economy back on track,” the IMF said in the statement.