Report: Portugal's bailout could exceed 100 billion euros

May 3, 2011, 10:50 GMT

Lisbon - Portugal's bailout may need to be more than 100 billion euros (148 billion dollars), the daily Diario Economico reported Tuesday - as Lisbon's negotiations with the European Union and the International Monetary Fund were drawing to a close.

The 100 billion would include 10 billion to recapitalize Portuguese banks, according to the daily, which did not name its sources.

However, there were doubts over whether the EU and IMF would give Lisbon more than the 80 billion euros forecast initially, the newspaper said.

A team of experts from the EU, IMF and the European Central Bank have been in Lisbon for three weeks to draw up a financial rescue package which will be presented to EU finance ministers on May 16.

The package is reported to be made public on Wednesday. However, Amadeu Alfataj, spokesman for European Economic Affairs Commissioner Olli Rehn, declined to confirm such reports, saying talks were still underway.

It was important to obtain the support of the Portuguese political parties for the package, the daily Publico quoted Alfataj as saying on arrival in Lisbon on Monday.

The EU wants to make sure the conditions for the bailout will be applied by the new government that emerges from the June 5 elections, which the conservative opposition is tipped to win.

In the Financial Times Tuesday, conservative leader Pedro Passos Coelho confirmed his support for the bailout, describing it as a 'vital, if depressing, step.'

Outgoing Socialist Prime Minister Jose Socrates' austerity policies had focused 'too much on austerity for ordinary citizens, rather than reducing the size of the state,' Passos Coelho wrote.

Socrates resigned on March 23 after parliament rejected his fourth austerity package, forcing President Anibal Cavaco Silva to call snap elections.

That bailout conditions that were being considered by the EU, IMF and ECB included higher Tier 1 capital ratios for banks, Publico said.

Markets meanwhile maintained a high pressure on Portuguese bonds, with the yields for five- and ten-year bonds reaching 11.6 and 9.6 per cent respectively.

Portugal will be third eurozone country to be rescued financially, after Greece and Ireland.

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