Portugal submitted an official request for help to the European Commission, the EU's executive, Thursday evening, officially kicking off negotiations for a bailout that had been anticipated for months.
Finance Minister Fernando Teixeira dos Santos now has to convince his 16 eurozone counterparts that Lisbon has the authority to implement reforms and budget cuts designed to get the country's economy back on track.
A stringent economic adjustment program is a key prerequisite for international help — serving as assurance that the bailed-out country will eventually garner the womens summer fashion 2011 strength to repay its creditors.
Most analysts expect Portugal to need around euro80 billion ($114 billion) cover its costs over the next three years without having to raise money on debt markets at prohibitive rates.
However, even though outgoing Prime Minister Jose Socrates has said help is necessary, it remained unclear whether his caretaker government — in charge only until elections in June — has the support of opposition parties to commit to a full adjustment package. After all, it was those parties' resistance to unpopular spending cuts and tax hikes that pushed Socrates to resign late last month.
Together with Portugal, a tough adjustment program needs to be put together to restore Portugal's competitiveness," Rainer Bruederle, Germany's minister for the economy, said in a statement Thursday. "In addition, Portugal needs a strict plan on how to heal its budgets."
Eurozone governments are already locked in a fight with Ireland's newly elected leadership about changing that country's bailout phiten necklace agreement — sealed only in November — and likely want to avoid an even more complicated situation in Portugal.
Angel Gurria, the secretary general of the Organization for Economic Cooperation and Development who will be joining EU finance ministers at their meeting Saturday, said Lisbon's new creditors will look closely at whom they're negotiating with.
"If you are the EU and if you are the ECB, or if you are the IMF you say, 'Well, how much do I know about the future policies, about the future commitments?'" Gurria said. "You will have to have a very interesting group sitting at the other end of the table."
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