Ireland, Portugal Near Extension of Aid Loans, Dijsselbloem Says

Ireland and Portugal moved closer to winning extra time to pay back emergency loans, trying to become the first countries to rebound from Europe’s debt crisis.

A seven-year extension of loans from the 17 euro countries was approved this morning and a similar extension of loans from the European Union budget will be endorsed this afternoon, Dutch Finance Minister Jeroen Dijsselbloem told reporters after chairing a euro finance meeting in Dublin.

Ireland’s 10-year bond yields of 3.89 percent make it a stronger candidate for a full return to market financing than Portugal, which has yields of 6.31 percent and faces demands for additional budget cuts from creditor governments.

European governments are keen on selling the two countries as crisis-management success stories as they struggle to keep aid plans for Greece and Cyprus on track and gear up for a possible bailout of Slovenia as well.

The concession “is a welcome confirmation of renewed support for both their efforts to smoothly exit their adjustment programs,” said Owen Callan, a Dublin-based analyst with Danske Bank A/S. It is “a further example of the EU’s ‘carrot and stick’ approach to countries forced to ask for assistance in managing their debt and deficit problems.”

Dijsselbloem called Ireland, which aims to be weaned off fresh bailout loans by the end of the year, a “living example that adjustment programs do work.” He said Portugal, seeking to exit its bailout in May 2014, has bigger “challenges” to deal with.

A new snag cropped up last week when Portugal’s highest court blocked 1.3 billion euros ($1.7 billion) in savings, forcing the government to find new reductions. Prime Minister Pedro Passos Coelho said in Lisbon today that 1.2 billion euros will be cut from the 2013 budget. New cuts will make up half the total and the fast-tracking of cuts planned for 2014 the other half, he said.

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