European finance ministers have agreed to offer a bailout package to Lisbon. Portuguese politicians, who go to the polls in June, were warned to put consensus on tough austerity measures ahead of electioneering.
The Portuguese bailout will be about 80 billion euros
Europe offered Portugal a bailout expected to total 80 billion euros (115 billion dollars) on Friday, setting tough conditions for the country to qualify for the rescue package.
The loans depend on Lisbon introducing spending cuts and tax rises that are likely to prove unpopular with the electorate as Portuguese politicians prepare for elections on June 5.
Rehn said responsibility on the part of politicians was vital
The European Commission's Economic Affairs Commissioner Olli Rehn revealed the expected size of the loan, and warned Portugal's political parties to behave responsibly.
"I trust that all political parties and the government will realize their responsibility to overcome the current difficulties for the sake of all the people of Portugal and for the sake of the financial stability of Europe," said Rehn.
As well as being financed by European Union member states, the deal is to be one-third funded by the International Monetary Fund, pending confirmation from Washington.
Program of privatization
The deal with Lisbon required "an ambitious privatization program," labor market reform and "measures to maintain the liquidity and solvency of the financial sector," according to Rehn.
Acting Finance Minister in Portugal’s caretaker government Teixeira dos Santos said that, despite the elections, he thought political parties would form some consensus on implementing the package.
"I am aware these are not the most favorable conditions for a country to negotiate and to commit," said Santos. "But, involving all political parties I think we can guarantee a level of commitment that is required for us to overcome the immediate challenges."
Juncker predicted the package would be ready for mid-May
EU finance ministers met in the Hungarian town of Godollo near Budapest, where Portugal's request for a financial bailout from the European Union and the International Monetary Fund topped the agenda.
Approval expected mid-May
The chair of the group of eurozone finance ministers, Jean-Claude Juncker, said on Friday that a bailout package for Portugal should be approved by mid-May. This would make it ready for implementation after Portugal's elections.
"Financial support will be provided on the basis that a policy program will be supported by strict conditionality negotiated with the Portuguese authorities, duly involving the main political parties," said Juncker.
Last week, the Portuguese government collapsed after it failed to pass austerity measures aimed at reducing its debt burden, forcing outgoing Prime Minister Jose Socrates to call a snap poll.
When the international bailout eventually comes together for Portugal, it would be the third European country - after Greece and Ireland - to receive emergency financial aid as Europe faces a debt crisis.
Author: Matt Zuvela, Richard Connor (AFP, dpa, Reuters)
Editor: Nicole Goebel