Cookie consent

We use cookies to improve your experience on this website. By continuing to browse our site you agree to our use of cookies. Tell me more | Cookie preferences

Lisbon struggles to avoid second bailout

    Just Watched

    Portugal hopes to avoid second bailout

Portugal hopes to avoid second bailout 02:09

Story highlights

  • Portugal is tussling to meet its deficit reduction targets during a deep recession
  • Would have to raise a lot more cash to meet its planned exit from the bailout programme in 2014
  • Alongside Ireland, Portugal is seeking more time to repay its existing bailout loans

Portugal could struggle to avoid a second international rescue even if it, alongside Ireland, is granted more time to repay its existing bailout loans by eurozone finance ministers meeting in Dublin on Friday.

Portugal, which is tussling to meet its deficit reduction targets during a deep recession, would have to raise a lot more in the two years after its planned exit from the bailout programme in 2014 than it did in pre-crisis times, according to a document seen by the Financial Times. Yet, the document says, "at this stage Portugal's market access can only be considered limited and opportunistic".

Lisbon's bailout is due to come to an end in July 2014 and the extension of maturities of its bailout loans is intended to smooth its full return to markets. But it has to raise €14.1bn next year and €15bn in 2015, whereas before the crisis it was typically raising €10bn-€12bn a year.

Ireland is also facing a big financing challenge. It needs to refinance €20bn per year from 2016-20, which is about 12 per cent of the country's projected economic output for this year. More time to repay its bailout loans would help, but Ireland has more of a record in re-entering the markets.

Jeroen Dijsselbloem, the Dutch head of the eurogroup of finance ministers, raised expectations of a deal to extend the average maturity of the bailout loans for Portugal and Ireland by seven years to ease the way for the two countries to fully re-enter debt markets.

    Just Watched

    Portugal's shoe industry steps up

Portugal's shoe industry steps up 02:51
PLAY VIDEO

    Just Watched

    Is Slovenia next eurozone problem?

Is Slovenia next eurozone problem? 03:23
PLAY VIDEO

    Just Watched

    What's next for Europe's recovery?

What's next for Europe's recovery? 03:13
PLAY VIDEO

"I hope that we will be able to finalise that tomorrow [Friday]," Mr Dijsselbloem said on a visit to Cork on Thursday.

    Some European officials had pointed to German reservations as a potential obstacle to an agreement on extending the loans.

    The German parliament will have to vote on any significant extension of the eurozone rescue programmes for Portugal and Ireland, with opposition members demanding reassurance that they are realistic and sustainable.

    Officials in Berlin say the German government does not have any fundamental objection to measures to ease the repayment terms, but it may face tough questions in the Bundestag over the conditions attached to the programmes.

    A seven-year extension would have to be approved by the full parliament, they said.

    Both the Social Democratic party and the Greens set tough conditions on the rescue programme for Cyprus, which they are expected to approve next week, and they will want similar reassurances about debt sustainability in Ireland and Portugal.

    "There must be a vote on any extension of the repayment period, and each case is different," one opposition budget expert said. "They cannot all be lumped together in a single vote."

    Government officials played down suggestions that Germany may object to an easing of the payment terms, pointing out that Wolfgang Schäuble, the finance minister, had agreed with all his colleagues to a reassessment being carried out by the European Commission.

    The SPD and Greens have been very critical of "tax dumping" in countries such as Ireland and Cyprus, which have traditionally had much lower corporate taxes than the rest of the eurozone. But a new effort to force Dublin to raise its rate from 12.5 per cent seems unlikely at such a late stage in the bailout effort.

    "No one wants to force them into a new programme," the budget expert said. "The question is whether they really have advanced as far as they say. We want to be sure there is no danger of another round of bank recapitalisation."

      CNN Business

    • An Iraqi worker adjusts a control valve at the Daura oil refinery on November 5, 2009 in Baghdad, Iraq. Iraq and a grouping of U.S and European oil companies Exxon Mobil Corp and Royal Dutch Shell PLC signed a $50 billion contract today to develop the West Qurna oilfield, two days after the Iraqi South Oil Company signed a technical service contract with Britain's BP and China's CNPC to develop the Rumaila oilfield. The Iraqi government is trying to attract foreign investment, especially in the oil sector, in hopes of reviving its war-torn economy. Iraq has the third largest oil reserve in the world but it is producing way below its potential. (Photo by Muhannad Fala'ah/Getty Images)

      Airstrikes, rebels seizing control of oil fields, plus a severe refugee crisis are a recipe for market panic. So why are Iraq oil prices stable?
    • A view of gloves and boots used by medical staff, drying in the sun, at a center for victims of the Ebola virus in Guekedou, on April 1, 2014. The viral haemorrhagic fever epidemic raging in Guinea is caused by several viruses which have similar symptoms -- the deadliest and most feared of which is Ebola. AFP PHOTO / SEYLLOU (Photo credit should read SEYLLOU/AFP/Getty Images)

      The biggest Ebola outbreak in history is taking its toll in Western Africa, hitting some of West Africa's most vulnerable economies.
    • People enter a casino in Las Vegas, Nevada, on April 18, 2009. Las Vegas is the most populus city in the US state of Nevada and internationally renowned major resort city for gambling, shopping, fine dining and entertainment. Las Vegas which bills itself as the �Entertainment Capital of the World� is famous for the number of casino resorts and associated entertainment. AFP PHOTO/Jewel SAMAD (Photo credit should read JEWEL SAMAD/AFP/Getty Images)

      Macau has overtaken Switzerland in the wealth stakes, being named the world's fourth richest territory by the World Bank.
    • spc marketplace middle east ata atmar a_00010015.jpg

      Saudi Arabian Bateel brand is best known for its delectable dates but it now has more than a dozen cafes and a new bakery in the works.
    • Vantablack designed by Surrey NanoSystems absorbs 99.96% of all light. It however will not be the solution to the creating the world's ultimate slimming black dress! A dress made out of this material would render the curves and contours of the human body invisible and would leave the wearer looking like 'two dimensional cardboard cut-out.'

      A British nanotech company has created what it says is the world's darkest material. It is so dark the human eye can't discern its shape and form.
    • Jibo robot is designed to be an organizer, educator and assist family members. CNN's Maggie Lake met him and says she was impressed with his skills.
    • A picture taken on March 15, 2014 shows children playing at the sprawling desert Zaatari refugee camp in northern Jordan near the border with Syria which provides shelter to around 100,000 Syrian refugees. Syrian refugees in the seven-square-kilometre (2.8-square-mile) Zaatari camp in Jordan fear that President Bashar al-Assad's likely re-election this year will leave their dream of a return home as distant as ever. The brutal war in Syria between the regime and its foes shows no sign of abating and has killed at least 146,000 people since it erupted in mid-March 2011. And 2.5 million Syrians have fled abroad and another 6.5 million have been internally displaced. Jordan is home to more than 500,000 of the refugees.

      Sandwiched in between Iraq and Syria, Jordan's destiny seems to be one of a constant struggle for survival. John Defterios explains.
    • SHEFFIELD, ENGLAND - NOVEMBER 18: Queen Elizabeth II wears 3 D glasses to watch a display and pilot a JCB digger, during a visit to the University of Sheffield Advanced Manufacturing Research centre, on November 18, 2010 in Sheffield, England. (Photo by John Giles - WPA Pool/Getty Images)

      At the last football World Cup, it was all about 3D. This time around, it's nothing less than 4K.
    • An Iraqi worker adjusts a control valve at the Daura oil refinery on November 5, 2009 in Baghdad, Iraq. Iraq and a grouping of U.S and European oil companies Exxon Mobil Corp and Royal Dutch Shell PLC signed a $50 billion contract today to develop the West Qurna oilfield, two days after the Iraqi South Oil Company signed a technical service contract with Britain's BP and China's CNPC to develop the Rumaila oilfield. The Iraqi government is trying to attract foreign investment, especially in the oil sector, in hopes of reviving its war-torn economy. Iraq has the third largest oil reserve in the world but it is producing way below its potential. (Photo by Muhannad Fala'ah/Getty Images)

      Iraq produces 3.3 million barrels per day and has the world's fourth-largest oil reserves. But the current crisis is putting all this in danger.
    • Valves of gas pipe-line are seen in the gas station not far from Kiev on March 4, 2014. The European Union will help Ukraine pay the $2.0 billion it owes to Russian gas giant Gazprom, a top official said Tuesday, as part of an aid package reportedly worth more than one billion euros. AFP PHOTO/ ANDREY SINITSIN (Photo credit should read ANDREY SINITSIN/AFP/Getty Images)

      The gas standoff between Russia and Ukraine could have a knock-on effect on Europe. Explore this map to find out why is the EU nervous.