Eurozone finance ministers favour giving bailed-out Ireland and Portugal an extra seven years to repay the aid they received to save them from collapse, Eurogroup head Jeroen Dijsselbloem said Friday.
Ministers “want to make a definitive and positive” decision on the extension, designed to ease the pressure on both countries, when they meet their 10 non-euro colleagues later in the day, Dijsselbloem said.
The extension is crucial for Portugal, the recipient of a 78-billion-euro ($102-billion) bailout in 2011, after the country’s Constitutional Court last week ruled that several measures in the 2013 budget were unlawful.
That ruling will make it difficult for the government to reduce the public deficit to 5.5 percent of gross domestic product (GDP), which it pledged to do to remain eligible for funds under its EU and IMF bailout.
Finance Minister Vitor Gaspar is trying to identify new cuts to plug a 1.3-billion-euro gap.
Dijsselbloem noted that the Portuguese government was “addressing this challenge,” and said the troika of EU, IMF and European Central Bank lenders was expected to approve the adjustments.
The Portuguese government said Thursday it would provide guarantees to EU partners that it would meet the deficit cutting targets.
Extending the loan repayment period would in turn provide a big boost for Lisbon and help ensure the sustainability of Portugal’s public finances.
In particular, it would reduce the amount of money that Portugal needs to borrow in the future, and therefore make it easier for the country to fund itself exclusively on sovereign bond markets when the rescue programme ends in June 2014.
Eurozone 'backs 7-year Irish, Portuguese debt extension'
