Wednesday, May 4, 2011

Bailout: a "good deal" has been struck

A proposed deal has been struck in Lisbon with Portugal's caretaker government for a three-year bailout loan worth just short of €80 billion.

It's a good deal, trumpeted José Sócrates last night. “This is a deal that defends Portugal,” said the prime minister who resigned when Portugal had no alternative but to seek outside help. The terms would be less onerous than those set for Greece and Ireland, he said. (Sócrates is pictured here with his finance minister, Fernando Teixeira dos Santos, announcing the deal).

If accepted by other parties here and within the EU, the bailout plan will rescue Portugal from bankruptcy. Any rejoicing will be short-lived, however.

The nitty-gritty has not yet been revealed, but the plan is likely to include tough conditions that many already hard-up people in one of Europe's poorest countries may find crippling. Those who have been hit in recent months with harsh austerity measures may be clobbered again with further tax rises, pay and pension cuts and less welfare entitlements.

Over the past three weeks, negotiators representing the International Monetary Fund, the European Central Bank, the European Commission and the Portuguese state have been faced with awkward deadlines. European finance ministers set a target date of May 16  for final Europe-wide approval of any plan. Meanwhile, campaigning is underway for a snap general election on June 5. Also in June, debt repayments amounting to some €7 billion fall due.

Portugal has got itself into this mess because of pathetic annual growth levels which have driven it deeper and deeper into debt. Recession looms this year and next.

So, have we reached a moment to take stock and contemplate? Portugal's civil servants don't think so. “It's time to fight,” says Ana Avoila, head of Portugal's Common Front of Civil Servant Unions. Schools, hospitals, courts and most public offices are expected to be disrupted by a national strike of civil servants planned for this Friday.

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