REFILE-WRAPUP 7-Ireland nears rescue, Portugal denies it next

* Ireland expected to clinch EU/IMF deal over weekend

* EU officials reject report Portugal pressured to seek aid

* Spanish PM says no chance of Madrid seeking bailout

(Adds RTE report on interest rate; fixes typo in para 10 quote)

By Peter Graff and Sergio Goncalves

DUBLIN/LISBON, Nov 26 (BestGrowthStock) – Ireland hammered out the
final details of an EU/IMF rescue on Friday as financial market
pressure mounted on Portugal and Spain despite vehement denials
from euro zone governments that they too might require bailouts.

The euro currency dipped as low as $1.32 for the first time
in over two months and shares on both sides of the Atlantic fell
amid fears the currency bloc’s debt crisis could deepen further
and the 85 billion euro ($113 billion) package for Ireland might
not be the last.

The bloc’s woes and the seeming inability of its leaders to
unite behind a plan to stem the contagion has prompted some
experts to speculate the 16-nation currency area could splinter
apart, but the costs of a breakup would be catastrophic and the
chances are still seen as extremely slim.

European officials were forced to deny a German newspaper
report on Friday that Portugal was under pressure from some of
its euro zone partners to follow Ireland and seek a rescue in
order to prevent contagion to its much larger neighbour Spain.

EU Commission President Jose Manuel Barroso, a former
Portuguese prime minister, dismissed the report in the Financial
Times Deutschland as “absolutely false, completely false”,
saying an aid plan for Portugal had neither been requested nor
suggested. [ID:nLDE6AP0S0]

Risk premiums on Portuguese (PT10YT=TWEB: ) and Spanish
(ES10YT=TWEB: ) debt were hovering near their highs on Friday.

The premium investors demand to hold Irish government bonds
rather than German benchmarks hit a new euro-lifetime peak of
close to 7 percentage points following reports that senior
bondholders would share the cost of rescuing Ireland’s troubled
banks. [ID:nLDE6AP0BY].
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ TAKE A LOOK- Europe's debt problems [ID:nLDE68T0MG] Euro zone debt struggle graphic Breakingviews column on German bond plan [ID:nLDE6AO0L7] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>


Portugal’s struggles to meet fiscal targets for this year
have increased investor doubts about the credibility of its
consolidation strategy. [ID:nLDE6AP0F4]

Its parliament approved a 2011 austerity budget on Friday
designed to address those concerns and trim its budget deficit
to 4.6 percent of gross domestic product, from a projected 7.3
percent this year.

“Portugal has all the conditions to finance itself in the
markets as it has done,” Portuguese Prime Minister Jose Socrates
told foreign journalists in Lisbon. “I have good expectations
that approval of the budget will reinforce confidence in the

A Reuters poll this week showed 34 out of 50 analysts
surveyed believe Portugal will be forced to ask for help
although only four thought Spain would end up seeking aid.

The European Union could easily manage a rescue of Portugal
but coming to the aid of Spain, the euro zone’s fourth largest
economy, would stretch the 750 billion euro loan facility it set
up with the IMF back in May after a bailout of Greece.

Worries about contagion pushed even German bonds off their
highs late on Friday as investors worried Berlin may be asked to
shoulder the costs of more bailouts.

“Germany may ultimately be dragged into this as well in
terms of having to bail out their neighbours. The money
obviously has to come from somewhere,” said Michael Leister, a
strategist at WestLB.

Ireland’s unpopular government, whose bailout terms are
expected to be announced on Sunday, suffered a new blow when
Prime Minister Brian Cowen’s ruling Fianna Fail party was forced
to concede defeat in a parliamentary by-election.

The loss further weakens the government’s ability to pass
spending cuts and tax increases of 15 billion euros on which the
bailout depends, including 6 billion euros of savings in its
2011 budget which is due for a vote on Dec. 7.

A report late on Friday from state broadcaster RTE said the
interest rate on the bailout funds being negotiated with the EU
and IMF would be between 6 and 7 percent, at the high end of

The main opposition party Fine Gael said such a rate would
be unacceptably high, potentially creating a new hurdle for the
government as it works to complete the deal and secure passage
of the 2011 budget with its razor-thin majority.


Spanish Prime Minister Jose Luis Rodriguez Zapatero said on
Friday there was “absolutely” no chance Madrid would follow
Ireland and Greece and seek financial help. [ID:nLDE6AP0SV]

Spain hopes its austerity measures, progress on deficit
reduction and restructuring of its weaker banks will enable it
to weather the storm.

Unlike the other peripheral euro countries that have come
under pressure this year, Spain is on track to meet its deficit
reduction targets, having cut its budget shortfall by 47.3
percent in the Jan.-Oct. period compared with a year earlier.

Were the EU to be forced to help, meeting Spain’s financing
needs for 2-1/2 years would cost 420 billion euros, consultancy
firm Capital Economics estimates. That would exhaust virtually
all of the 440 billion euro European Financial Stability
Facility (EFSF) the euro zone set up after the Greece bailout.

The EFSF, a separate EU fund and International Monetary Fund
backing could provide loans worth 750 billion euros in total.

German Bundesbank chief Axel Weber, an influential member of
the European Central Bank, said this week the EFSF and other EU
rescue funds had enough money to cover the borrowing needs of
Greece, Ireland, Portugal and Spain. [ID:nLDE6AN28M]

But he added: “If that is not enough, I am convinced euro
zone states will do what is necessary to protect the euro.”

On Thursday, top EU officials said there was no risk of the
euro zone breaking up and German Chancellor Angela Merkel — who
unsettled markets earlier this week by saying the euro was in an
“exceptionally serious” situation — said she was confident the
euro area would emerge stronger from the crisis.
(Additional reporting by Dave Graham in Berlin; Jan
Strupczewski in Brussels; Writing by Noah Barkin)

REFILE-WRAPUP 7-Ireland nears rescue, Portugal denies it next