European finance ministers yesterday backed a three-year €78 billion EU/IMF bailout for Portugal on condition Lisbon embarks on a major raft of public sell-offs.
The ministers agreed unanimously to rescue Portugal, a statement said, making it the third euro zone country in the space of one year to receive a multi-billion-euro bailout after Greece and Ireland.
Portugal will pay an average interest rate of about 5.1% on bailout, its finance minister said.
'The interest rate will depend on market conditions,' Fernando Teixeira dos Santos was quoted by the Lusa agency as saying in Brussels.
Under current conditions, the average rate would vary between 5% in the first three years and 5.2% in following years, he said, adding that Portugal was to receive a first payment of €18 billion by the end of May or beginning of June.
The emergency loans to Lisbon are 'warranted to safeguard the financial stability in the euro area and the EU as a whole,' said the statement by ministers from the 17-nation euro zone and the remaining 10 European Union states that partly underwrite the emergency financial assistance.
The decision on Portugal was made during two-day talks otherwise focused on measures to ease the terms of Greece's repayment burden.
Portugal, under pressure from the markets for months, finally sought a bailout in April after the minority socialist government and right-wing opposition failed to agree on a new round of budget cuts.
The country holds an early general election on 5 June.
A key deadline also looms on June 15 when Portugal has to redeem debt of about €5 billion or face default.
Under conditions agreed earlier in the month, European states will provide two-thirds of the loans while the IMF will take care of one third.
The three-year deal requires Portugal to launch an 'ambitious privatisation programme', restructure and boost the capital of its banks, and reform its health system and public administration.
Portuguese government forecasts see the public deficit dropping from 5.9% this year to the euro zone ceiling of 3% by 2013.
The package of loans was made possible when Finnish lawmakers negotiating a new coalition government in Helsinki overcame resistance from an anti-bailout, euro-sceptic party that flourished in elections there.
Taking into account a key Finnish condition for the bailout, the EU ministers said in the statement that Lisbon should 'encourage private investors to maintain their overall exposures on a voluntary basis'.
This means that banks and other buyers would not pull their money out of the country.
The Finns wanted European governments contributing to the bailout to have their investments classed as priority above those of private buyers of Portuguese debt.
The EU ministers said the rescue programme is 'both ambitious and front-loaded, while safeguarding the most vulnerable groups in society.'
