The EU has ruled out a bridge loan to help tide over indebted Portugal until elections set for June. Meanwhile, the Portuguese opposition has expressed willingness to help the government implement austerity measures.
The EU says no loans are possible before elections
The head of the European Union's main executive body said Wednesday that Portugal cannot receive a bridge loan to service its debt before the country holds elections in June.
"It is not possible to provide bridging loans," European Commission President Jose Manuel Barroso, who also is a former Portuguese prime minster, told reporters in Brussels as Lisbon negotiates with the EU over the terms of a bailout.
Barroso estimated that financial aid for Portugal would amount to around 80 billion euro ($115 billion). However, the aid would come only after the elections. This puts pressure on Lisbon to implement more public spending cuts, tax increases and far-reaching privatization.
Opposition offers support
Current Portuguese Prime Minister Jose Socrates ended months of speculation when he announced last week that Portugal would need EU money in order to avoid defaulting on its debts.
Socrates, leading a caretaker government, had resigned his post when Portugal's parliament failed to pass austerity measures in early April.
However, the opposition Social Democrats (PSD) expressed their readiness on Wednesday to support the government in its bid to secure a bailout from both the EU and the International Monetary Fund (IMF).
"Conscious of the seriousness of the situation, the PSD will not hesitate in offering all the help it can so that the program for assistance can be met," PSD leader Pedro Passos Coelho told reporters after meeting with Socrates.
But Passos went on to say that any spending cuts implemented as a condition for receiving the bailout should not target minimum pensions.
No new Spanish austerity
Now that Portugal has announced the need for a bailout - the third Eurozone country to do so after Greece and Ireland - attention has turned toward the embattled Spanish economy, which currently has 20 percent unemployment.
Should Spain seek a bailout, the viability of Europe's common currency - the Euro - would be jeopardized.
China will continue buying Spanish debt
However, Spanish Prime Minister Jose Louis Rodriguez Zapatero ruled out new budget cuts on Wednesday as a condition for shoring up his country's economy and preventing a fourth European bailout.
"There are no new plans on the horizon to have to take any new [deficit reduction] measures. None," Zapatero said.
"The government hopes to push through new stimulus measures," he added.
Zapatero's announcement comes as Chinese investors visited Spain, where they promised to continue buying the country's debt.
Author: Spencer Kimball (AFP, Reuters, AP, dpa)
Editor: Michael Lawton