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Lawmaker says Portugal may get some bailout flexibility

Published on 04/09/2012

Portugal's international creditors showed openness to adjusting the country's rescue programme given worse than expected economic conditions, a lawmaker said Tuesday after meeting with the auditors.

“The troika showed flexibility on the programme being adopted to the economic conditions and their evolution since the (bailout) memorandum was signed in May 2011,” said Miguel Frasquilhol, the deputy head of the parliamentary group of the ruling centre-right Social Democratic party.

Auditors from the so-called troika of creditors — the European Union, International Monetary Fund and European Central Bank — arrived last week to monitor Portugal’s implementation of spending cuts and economic reforms under a rescue package worth 78 billion euros ($98 billion).

However those cuts and problems in the rest of the eurozone have caused Portugal’s economy to contract more than expected and the government looks increasingly unlikely to meet the target of reducing the public deficit to 4.5 percent of GDP this year.

Portugal aims to return to the EU limit of a public deficit of 3.0 percent of GDP next year.

Given the current situation, a number of analysts and opposition lawmakers have called for a relaxation in the implementation of spending cuts.

“We told the troika that things aren’t going well and we asked them about the possibility of making adjustments” that would favour growth, said lawmaker Pedro Marques of the opposition Socialists.

“Portugal needs to interrupt this austerity spiral, which weighs on people with measures which depress the economy and takes us further from meeting our budgetary targets,” he added.

Portugal’s economy is expected to contract by 3.0 percent this year and unemployment has shot up to a record 15 percent.

The European Commission declined to comment about the review while it is still underway in Portugal.