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Portugal May Need $100 Billion Bailout
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ARGOMENTO: Portugal May Need $100 Billion Bailout

Portugal May Need $100 Billion Bailout 8 Anni, 6 Mesi fa #1726

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A bailout for Portugal may total as much as 70 billion euros ($99 billion), two European officials with direct knowledge of the matter said as a credit-rating cut threatened to deepen Portugal’s debt woes.

Preliminary calculations put the cost of a lifeline between 50 billion euros and 70 billion euros, said the officials who declined to be named because the issue is confidential. Portugal continued to rule out a rescue, a day after the parliament’s rejection of budget cuts led Prime Minister Jose Socrates to offer to quit.

A downgrade by Fitch Ratings dealt a further blow today, as European Union leaders called on Socrates and the opposition parties to unite behind belt-tightening measures that might spare Portugal from becoming the third euro country to tap emergency aid.

“It’s pretty inevitable” that Portugal will need a rescue, said Jacques Cailloux, a London-based economist at RBS. “The market will deteriorate in the absence of other measures going through. There is obviously the risk of further downgrades, which will become anticipated by the markets and be a self-fulfilling prophecy.”

Portugal has proposed “a very ambitious, a very demanding reform program for the years 2011, 2012 and 2013,” German Chancellor Angela Merkel told reporters before a summit in Brussels. “It will depend on all with responsibility in Portugal today or possibly tomorrow committing to the goal of this program so that the markets can gain confidence.”

The leaders’ meeting, which started at 5 p.m. today and ends tomorrow afternoon, will also consider lower interest rates for Ireland’s emergency loans and German efforts to renegotiate the financing of a permanent rescue fund to be set up in 2013.

“This crisis occurs in the worst possible moment for Portugal,” Socrates said last night. Greece and Ireland were forced to seek bailouts last year.

The political crisis comes as Portugal braces for its first bond maturities of the year. Portugal faces redemptions in April and June worth about 9 billion euros in total. It also faces bill maturities in July, August, September, October and November. The country intends to sell as much as 20 billion euros of bonds this year to finance its budget and cover maturing debt.

“Portugal faces heavy redemptions in April and June and difficult and costly access to the primary market, which makes it hard to roll over the debt,” Tullia Bucco, an economist at UniCredit SpA in Milan, said in an e-mailed note to investors.

Portugal May Need $100 Billion Bailout 8 Anni, 6 Mesi fa #1744

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Portugal, Greece get ratings downgrade

30 March 2011, AFP

Standard & Poor's downgraded its credit ratings on struggling Greece and Portugal overnight, saying that investors in their bonds could lose out under the terms of a new eurozone bailout system.

S&P cut Portugal by one notch to BBB-, having slashed its rating only last week on fears Lisbon would have to seek a bailout after the government fell when parliament rejected austerity plans aimed to balance the public books.

Greece was cut by two notches to 'BB-.' Both countries have been hit by a series of downgrades in the past few months as the money markets bet that they will have to restructure their debt at the expense of investors.

S&P, one of the top three ratings agencies, said Tuesday's downgrades reflected its concerns that a new eurozone debt rescue system agreed at an EU summit last week would be to the detriment of creditors.
Gold is the money of kings, silver is the money of gentlemen, barter is the money of peasants, but debt is the money of slaves.

Portugal May Need $100 Billion Bailout 8 Anni, 6 Mesi fa #1796

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Portugal edges closer to bailout after debt downgrade

05.04.2011 - Unity

Portugal moved closer to the brink of a financial rescue package on Tuesday after Moody's downgraded its debt, pushing its bond yields near to those of Ireland.

Moody's cut its rating on Portugal's sovereign debt by one notch from A3 to Baa1, just three places above junk. It warned that Portugal is rapidly approaching the point where it will be unable to finance itself.

"Moody's believes that the government's current cost of funding is nearing a level that is unsustainable, even in the short-term," it explained.

The agency had been expected to downgrade Portugal, following rival rating agencies Fitch and S&P, but the move focused attention on the country's ability to keep resisting a bailout.

The financial markets appear to have priced in a Portuguese bailout as a virtual certainty. Following the downgrade the yield, or interest rate, on Portuguese five-year bonds rose to around 10%, an unsustainably high level. Irish five-year bonds were trading around 10.25% on Tuesday.

Last week Portugal admitted that it had missed its target for deficit reduction in 2010. The country is also gripped by political uncertainty following the resignation of prime minister José Sócrates, whose austerity programme was rejected by the Lisbon parliament. A general election is scheduled to take place on 5 June.

Moody's predicted that the next Portuguese government will seek a rescue package from the European Union and the International Monetary Fund as a matter of urgency.

Even before the nation goes to the polls, Portugal must refinance €4.3bn (£3.8bn) of debt this month, with another €4.9bn coming up for renewal in May. It had managed to sell bonds this year, but only by agreeing to pay much higher yields than usual.

At Baa1, Moody's still has a higher rating on Portugal than S&P, which slashed its rating to the brink of junk status in March. Moody's, though, kept Portugal on negative review, meaning further downgrades are possible.
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