Schaeuble Signals Germany Is Flexible on Revising Terms of Portuguese Aid
Germany may be willing to study revising the terms of Portugal (EUBDPORT)’s bailout, Finance Minister Wolfgang Schaeuble told his Portuguese counterpart in Brussels in a conversation picked up by Portuguese television.
Germany will “be ready” for an adjustment of the Portuguese program if needed, Schaeuble told Finance Minister Vitor Gaspar at a meeting of European officials yesterday. He said it was key that a decision first be made on Greece.
“That’s much appreciated,” Gaspar said in a videoclip posted on the website of television station TVI.
Portugal got a 78 billion-euro ($104 billion) bailout from the European Union and the International Monetary Fund last year after a rising budget deficit and public debt drove up borrowing costs. Spending cuts and tax increases to improve the nation’s finances have contributed to a recession, with the EU in November forecasting a 3 percent contraction this year, worse than Greece’s 2.8 percent.
Schaeuble told Gaspar, who worked for six years at the Frankfurt-based European Central Bank, that the German government faces skepticism at home from the public and members of parliament who “don’t believe our decisions are serious.”
Portugal isn’t seeking more flexibility for its program, Gaspar told reporters in Brussels later in comments broadcast by television channel SIC Noticias.
“We won’t ask for more time or for more money, we will meet our adjustment program,” he said.
European finance ministers yesterday held back a new rescue package for Greece. The ECB should participate in efforts to reduce Greece’s debt, Luxembourg’s Jean-Claude Juncker, who leads the group of euro-area finance ministers, said in Brussels today.
While Ireland isn’t looking to vary the terms of its bailout, it is seeking European help to lessen the burden of banking debt it faces after injecting 62 billion euros into the financial system. Ireland will seek to take advantage of any “arrangement” that Greece agrees to with the ECB on the country’s debt, as the government seeks help refinancing the bailout of the former Anglo Irish Bank Corp (ANGL)., Finance Minister Michael Noonan said on Feb. 8.
Portugal’s aid plan assumes the country will regain access to medium- and long-term sovereign debt markets by late 2013, with the program’s last disbursement to be made in June 2014, the IMF said in December. Prime Minister Pedro Passos Coelho on Jan. 24 reaffirmed that Portugal won’t ask to renegotiate the external aid it’s receiving from the EU and the IMF.
Passos Coelho said Portugal will be able to continue to rely on its international lenders as long as it meets the program’s targets. “If for external reasons that don’t have to do with the fulfillment of the program, Portugal or Ireland aren’t in a condition to return to market on the scheduled date, the IMF and the EU will maintain aid,” he said.
There is no risk of investors being asked to take losses on Portuguese debt, Passos Coelho said on Jan. 30, as Greece negotiated a debt writedown with investors.
Portugal won’t need a second bailout if it carries out the current aid program, Poul Thomsen, head of the IMF mission that prepared the financial aid plan for Portugal, said on Dec. 21. The possibility of reviewing Portugal’s fiscal targets shouldn’t be ruled out if there is a “major deterioration” in the external environment and that hits the Portuguese economy “badly,” Thomsen said.
The government plans to trim the budget deficit from 9.8 percent of gross domestic product in 2010 to 4.5 percent in 2012 and to the EU ceiling of 3 percent in 2013. Portuguese government debt is projected to “stabilize” at 112 percent of GDP in 2013, after reaching 111 percent in 2012, according to the EU Commission.
The Portuguese government yesterday said the third review of the financial aid program provided by the EU and the IMF will start on Feb. 15.