Europe’s plan to halt debt cri­sis

Townsville Bulletin - - Investor -

EUROPE set out its arse­nal to pre­vent a re­peat of a year-long debt roller­coaster, amid ris­ing ex­pec­ta­tions that Por­tu­gal needs a $ 104.31 bil­lion bailout af­ter hefty credit rat­ing down­grades.

A two-day Euro­pean Union sum­mit called to seal the bloc’s ‘‘ com­pre­hen­sive’’ re­sponse to a debt cri­sis crossed a ma­jor hur­dle on Thurs­day when part­ners con­ceded to a last-minute Ger­man de­mand.

Ber­lin suc­cess­fully ar­gued that the time­frame for con­tri­bu­tions to a fu­ture res­cue fund should be rene­go­ti­ated.

But af­ter last

year’s

mas­sive bailouts to Greece and then Ire­land, Por­tu­gal edged a lit­tle closer to the brink on Thurs­day.

New York-based Stan­dard and Poor’s low­ered its rat­ing for Por­tu­gal’s long-term pub­lic debt by two notches to BBB, hours af­ter Lon­don’s Fitch Rat­ings took it down by two notches, from A+ to A-.

Those de­ci­sions came af­ter Por­tu­gal’s par­lia­ment re­jected the gov­ern­ment’s lat­est aus­ter­ity pack­age, prompt­ing prime min­is­ter Jose Socrates to re­sign late on Wed­nes­day.

But Lux­em­bourg Prime Min­is­ter Jean-Claude Juncker, who chairs the group of eu­ro­zone fi­nance min­is­ters, said on Thurs­day: ‘‘ Por­tu­gal won’t be left ex­posed by its Euro­pean part­ners.’’

Should Lis­bon re­quire as­sis­tance, Juncker sug­gested 75 bil­lion eu­ros would be ‘‘ ap­pro­pri­ate’’, but only ‘‘ un­der strict con­di­tions’’.

T o p E U f i g u r e s w a r n e d Por­tu­gal there could be no es­cape f r om f i erce bud­get s avings. Euro­pean Cen­tral Bank chief Jean-Claude Trichet said it was ‘‘ cap­i­tal that Por­tu­gal would con­firm plans that had been de­signed and ap­proved by’’ EU in­sti­tu­tions.

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