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Europe

Portugal defends its economy ahead of crucial bond sale

As Portugal prepares to auction off over a billion euros of debt, Prime Minister Jose Socrates has tried to quash speculation that his country may be next in line for an EU-IMF economic bailout.

Portuguese euro in a wrench

Portugal is under pressure from other eurozone countries

Portugal, the latest euro zone member to face pressure to seek an economic bailout package, has said it has no need of outside help.

"The Portuguese government and Portugal will not ask for any aid or financial assistance for the simple reason that it is not necessary," Prime Minister Jose Socrates told a press conference.

Socrates said his country had beaten its goal for reducing the 2010 budget deficit. It was below the 7.3 percent target in 2010, and he aims to slash that deficit to 4.6 percent in 2011.

He said the "rumors about external assistance are speculation which harms the interests of the country."

Crunch test

The prime minister's press conference comes as Portugal prepares to sell up to 1.25 billion euros ($1.6 billion) worth of government bonds.

Jose Socrates

Prime Minister Jose Socrates said aid is not necessary

Wednesday's sale in Lisbon will feature both five and 10-year papers and is seen as a key test for Portugal.

The debt auction marks Portugal's first foray into the bond markets since Ireland was forced to seek an EU-IMF bailout in November.

And Portugal suffered a fresh blow as the central bank said the country would have 1.3 percent recession this year, downgrading a previous outlook of zero growth.

Portugal's Finance Minister Fernando Teixeira dos Santos said on Tuesday Portugal "would do everything" to avert taking external help.

He complained that "Europe does not seem to be doing its job to maintain the stability of the euro."

German pressure?

Several EU countries have been accused of putting pressure on Portugal to take a bailout, so as to avert a wider crisis in the euro zone.

Germany has denied reports it is pressuring Portugal to accept a bailout, with German Chancellor Angela Merkel saying Lisbon has "taken sufficient measures."

During a visit to Cyprus, Merkel said that Portugal had pledged to take more steps if necessary.

"But their implementation needs time and only after time has passed will the results become evident," the German chancellor said.

Author: Catherine Bolsover (Reuters/dpa/AFP)
Editor: Michael Lawton

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