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Portugal reaches deal with EU/IMF for €78bn bailout
Portugal announced last night that it has reached an agreement with the EU/IMF for a €78bn bailout spread over three years. The plan will include €12bn in financial support for the Portuguese banking sector as well as pension cuts, but it is not expected to reduce the minimum wage or cut education or healthcare spending, according to Expresso. The deal also gives Portugal more time to reduce its deficit than was previously planned. The government will have to cut its deficit to 5.9% of GDP, from 9.1%, by the end of the year and to 3% by 2013. Details on the interest rate and on the source of the bailout funds have not been announced. Both decisions are expected to be made on 16 May.
In a brief television address, José Sócrates, caretaker Portuguese Prime Minister, suggested that the EU/IMF had recognised that “the situation in Portugal is far from being [as serious] as in other countries”, he added that “Portugal can feel reassured” by the deal, reports the FT. Sócrates’ message suggests that the terms of the bailout are more favourable that those offered to Ireland or Greece. The deal is yet to be approved by opposition parties, however, their support is expected. Following the announcement of the deal, the cost of borrowing for both Portugal and Spain has decreased slightly. Diário Económico argues that the bailout will not be sufficient, suggesting Portugal’s funding needs top €100bn over the next three years.
Meanwhile, Jyrki Katainen, likely to be the next Finnish Prime Minister, has said that he will put off talks on forming a new government until 18 May but will hold separate talks with the whole Finnish parliament over Finland’s participation in the Portuguese bailout. He hopes to gain a parliamentary mandate by 13 May, so that he is able to present Finland’s stance to other eurozone finance ministers on 16 May, when the final decision on the Portuguese bailout is expected. Yle reports that Timo Soini, leader of the True Finns, agreed with Katainen’s decision.
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Sarkozy pushes for budgetary discipline amid fears that France could lose its triple A rating
Le Monde reports that French President Nicolas Sarkozy is planning to make budgetary discipline a key element in his campaign for next year’s Presidential elections and calls for a constitutional change which would bind governments to ensure a balanced budget in the future. The article notes that such a move could partly derive from France’s fears of losing its triple-A credit rating after Standard & Poor’s put US debt on a negative outlook two weeks ago.
El Economista reports that EFSF Chairman Klaus Regling has accused banks and the media of “pushing the debate” on restructuring because “the banks know that they can win a lot of money…[they] remember the very high fees that they received in the nineties in Latin America and Asia”.
Writing in FAZ, President of the Ifo Institute Hans-Werner Sinn, argues that the core eurozone countries have been bailing out peripheral countries for much longer than imagined through their lending within the Target 2 system of eurozone Central Banks. Not only did this massively increase the exposure of core countries to the peripheral economies, but it also allowed them to continue to run huge current account deficits.
On the WSJ’s Real Time Brussels blog, Charles Forelle argues: “There is compelling logic to the argument that, if it’s necessary to restructure Greek debt…it’s better to move decisively and rapidly. After all…the all-but-universal view of economists not employed by the European Union or the IMF is that Greece won’t be able to pay back its debt. And the situation hasn’t improved with waiting.”
FT: Wolf WSJ: Real Time Brussels WSJ: Brussels Beat WSJ: Smith Irish Independent: McWilliams Telegraph: Reece El Pais: Editorial Expresso: Lemos Esteves Expresso: Garrido Diário de Notícias: Soares Le Monde FT El Economista FT 2 FT 3 Irish Independent 2 Bank of Spain’s Financial Stability Report El Pais Saxo Bank FD Eleftherotypia Ta Nea Kathimerini FAZ: Sinn Project Syndicate: Sinn
European banks face FSA pressure for greater oversight
The WSJ reports that the FSA is pressuring some European banks to restructure their operations in the UK in order to make them subject to stricter supervision from the UK’s financial regulator. The article notes that the move may conflict with rules allowing financial institutions from anywhere in the European Economic Area – which includes the EU’s 27 member states plus Norway, Iceland and Liechtenstein – to open branches in other member countries whose supervision primarily remains with national regulators in their home countries.
WSJ
Open Europe’s Pieter Cleppe appeared on Europarl TV discussing the possible EU accession of Croatia, Iceland and Turkey.
Europarl TV
The European Court of Justice ruled yesterday that only the European Commission can decide whether a company has broken EU wide antitrust rules outside of their home country. This means that even if a company were exonerated by a national competition authority it could still be found guilty by the Commission. The decision came following the case against Telekomunikacja Polska SA, Poland’s largest phone company.
Bloomberg Euractiv.de
Open Europe’s report on EU development aid continues to receive media coverage. Dutch magazine Elsevier noted that Open Europe’s report highlights some "absurd" cases of EU spending used in development aid, such as funding dancing lessons in Burkina Faso.
Open Europe research Open Europe press release Elsevier
UN General Assembly yesterday voted to give the EU enhanced Observer Status, reports European Voice. EU Foreign Minister Catherine Ashton said ‘the resolution will in future enable EU representatives to present and promote the EU’s positions in the UN, as agreed by its member states’.
LUSA Sveriges Radio BBC EUobserver Le Monde European Voice EurActiv
The Express reports that a number of public buildings around Britain are being ordered to fly the EU flag to celebrate Europe Day next Monday. The article notes that, in order to avoid fines from the Commission, the EU flag must fly for a week and officials are expected to provide prove that the rules are being observed.
Express
The EU is expected to shortly announce plans for nuclear stress tests. Member states are divided over whether to include 9/11-style plane crashes as a criterion, reports EUobserver. France has expressed fears that such rules could force the closure of plants that would otherwise have been kept open.
FT WSJ EUobserver
Le Point reports that France has called for targeted EU sanctions against Syrian President Bashar al-Assad.
Le Point
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