Portugal opposition committed to budget goals

LISBON (Reuters) – The leader of Portugal’s opposition Social Democrats (PSD) is fully committed to meeting budget goals agreed with Brussels and hopes the country will not need to seek a bailout, the head of the party said on Saturday.

Pedro Passos Coelho told Reuters in an interview that if the country were to need emergency financing to meet short-term financial payments, the caretaker Socialist government will have the power to seek a bridging loan until a snap election is held.

“I think we must avoid a situation like that,” Passos Coelho said, referring to a bailout.

However, he added that if there is an “emergency situation and there is a need for an emergency loan to avoid a Portuguese default situation” until an expected snap election in June, the caretaker government has the power to seek one.

Portugal entered a political crisis this week when the Socialist minority government resigned after Passos Coelho’s party and other opposition parties rejected austerity measures in parliament. The Socialists will remain as a caretaker government for now.

There are concerns in financial markets that the political limbo that will remain until a snap election could make it very difficult for Portugal to finance itself in debt markets, especially as it has to meet a bond payment in April of 4.5 billion euros ($6.4 billion).

“I don’t think anybody in Portugal, or in Europe, would leave Portugal to default because we are having elections,” he said. “Clearly not.”

Portuguese bond yields have shot higher since the crisis erupted and two rating agencies downgraded the country’s credit ratings because of the uncertainty created by the resignation of the government.

The crisis prompted many economists to predict Portugal will need a bailout like Greece and Ireland soon.

(Reporting by Axel Bugge and Sergio Goncalves)

Portugal opposition committed to budget goals