Portugal Won’t Get Final Bailout Disbursement, Albuquerque Says

Portugal said it won’t receive the final disbursement of its bailout program after deciding not to present the measures that will compensate for a high court ruling blocking certain spending cuts by June 30.

The government won’t seek an extension and won’t decide about these measures before it knows the size of the budget problem it may have to deal with, Finance Minister Maria Luis Albuquerque told reporters in Lisbon today. Albuquerque said there is “uncertainty” about the time that the Constitutional Court will take to decide on pending budget issues.

A new extension would reopen the aid program and that “would translate into a loss of credibility for the country,” Albuquerque said. The government remains committed to its budget goals, Albuquerque said. The final disbursement was worth 2.6 billion euros ($3.5 billion).

Portugal last month followed Ireland in exiting its three-year bailout program without the safety net of a precautionary credit line. The government announced the decision about the bailout exit on May 4 after the country in April held its first bond auction since requesting the 78 billion-euro rescue from the European Union and the International Monetary Fund in 2011.

The Constitutional Court on May 30 blocked further wage cuts for state workers this year and a reduction in illness and unemployment subsidies. Moody’s Investors Service said in a June 10 report that the measures blocked by the court are worth an estimated 500 million euros, or 0.3 percent of gross domestic product in 2014.

“Market financing is fully re-established at this moment and Portugal today has access to sustainable financing in terms of price and demand,” Albuquerque said.

Portugal’s borrowing costs yesterday fell to the lowest in almost nine years as it raised 975 million euros selling 10-year bonds at an average yield of 3.2524 percent. The country pays interest of about 3 percent on its bailout loans. Portugal built up a cash buffer before the end of the aid program and the debt agency ended 2013 with what it calls a treasury cash position of 15.3 billion euros.

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