Portugal will enter negotiations next week over an estimated €80-billion ($115 billion) financial rescue package from the European Union, becoming the third Euro-zone nation to do so after Greece and Ireland.
The negotiations come as the EU is facing growing internal concern about its economic alliance, with the German government in particular strained by public frustration over the rescue of another of its debt-strapped European neighbors.
Portugal, heading into elections in June, will be asked in turn to "implement sweeping austerity measures and conduct a major privatization program," the Financial Times' Niki Tatte reports--austerity measures which have proved extremely domestically unpopular:
Portugal first indicated late on Wedneday night that it would be seeking a bail-out package from the EU after months of speculation that it would become the third eurozone country to seek assistance in the current debt crisis.
Lisbon's move came after it was forced to borrow money at extremely expensive rates on capital markets. Portugal's debt has already reached more than 90 per cent of gross domestic product and the economy is sluggish. However, negotiations over the package could be complicated by the fact that the country currently has only a caretaker government ahead of elections in June.
On Friday, ECB president Jean-Claude Trichet denied that pressure from Frankfurt on Portugal's banks had been a catalyst for this week's developments. "We didn't force the banks to do anything," he said. [...]
(Commuters line up waiting for buses at Lisbon's Cais do Sodre public transport hub during a subway workers strike Thursday, April 7, 2011.: Francisco Seco/AP)