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Europe

Germany denies plan to press Portugal into bailout

Germany has denied reports that it is seeking to press Portugal into a bailout to stop Europe's sovereign debt crisis from spreading. There are concerns that Spain, a far larger economy, could be the next to fail.

A euro coin on a map of Portugal

Portugal is under new pressure after its interest rates rose

The German government denied on Sunday that it is planning to press Portugal into accepting a financial bailout package.

German news magazine Der Spiegel reported that Paris and Berlin were eager for Portugal to accept a bailout to stop the crisis spreading to Spain and Belgium.

Chancellor Angela Merkel's office on Sunday denied that Germany was putting pressure on the Portuguese. "It is not the strategy of the German government to push Portugal to call for Europe's rescue fund," said Merkel's spokesman Steffen Seibert.

However, lending weight to the Spiegel claims was a report by the news agency Reuters quoting a senior eurozone source as saying that France and Germany wanted Portugal to take the bailout.

"France and Germany have indicated in the context of the eurogroup that Portugal should apply for help sooner rather than later," the anonymous source said, adding that similar views had been expressed by Finland and the Netherlands.

Der Spiegel also added that the German and French leadership wanted members of the 17-country eurozone to reaffirm their commitment to the currency union - if necessary by expanding a 750-billion-euro ($970-billion) rescue fund.

Portugal claims austerity is enough

Portuguese Prime Minister Jose Socrates

Socrates believes austerity measures will prove sufficient

The magazine said that at a meeting in Strasbourg last week, German Finance Minister Wolfgang Schaeuble and his French counterpart Christine Lagarde had discussed the prospect of Portugal seeking help.

Portuguese Prime Minister Jose Socrates has insisted that his government's austerity measures will be enough to bring Portugal's debts down to an acceptable level without the need for help from the EU and IMF.

Interest rates on Portuguese debt sharply rose to a record high on Friday. The Portuguese government hopes to raise up to 1.25 billion euros on Wednesday with the sale of three and nine-year bonds. Interest rates also rose on Friday for Spain, which also aims to auction bonds this week.

Spain is seen as the major worry for the eurozone, its economy being twice the size of Portugal, Greece and Ireland combined. Spain's banking sector is struggling with bad debts and unemployment in the country stands at almost 20 percent.

Investors are also becoming concerned about Belgium, which has had no government for nearly seven months amid a continuing political stalemate.

Author: Richard Connor (AFP, Reuters)
Editor: Martin Kuebler

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