UPDATE 1-Portugal banks urging govt to seek loan-daily

* Millennium CEO says country needs loan

* Two big bond redemptions in coming months

* Opposition floats idea of short-term loan, PM rejects

(Updates with details, separate report, quotes)

LISBON, April 5 (Reuters) – Portugal’s biggest banks will
stop buying government bonds and are urging the caretaker
administration to seek a short-term loan to secure financing
until a June 5 election, business daily Jornal de Negocios
reported on Tuesday.

The heads of Banco Espirito Santo (BES.LS: Quote, Profile, Research), Millennium bcp
(BCP.LS: Quote, Profile, Research) and Banco BPI (BBPI.LS: Quote, Profile, Research) met with the governor of the
Bank of Portugal to pass on their views on Monday, Jornal said.

Nobody at the Bank of Portugal was immediately available to
comment on the report.

But Carlos Santos Ferreira, head of Millennium bcp,
Portugal’s biggest private bank, said in a television interview
late Monday that it was “indispensable that the country seeks a
short-term loan”.

A spokesman from the bank would not comment on whether the
bank had decided not to buy government debt.

A short-term loan has been mooted by Portugal’s opposition
Social Democrats as a solution to growing financial uncertainty
caused by the resignation of the government after parliament
rejected its latest austerity measures.

The party’s leader, Pedro Passos Coelho, suggested such a
move in a Reuters interview last week. [ID:nLDE72P0BM]

A short-term loan, from the International Monetary Fund or
European Union, could sooth concerns around two big bond
redemptions the country faces in April and June. Such a loan
would be separate to any eventual bailout, which economists say
is virtually inevitable.

Moody’s cut Portugal’s sovereign debt by one notch on
Tuesday, saying it believed an incoming government would need to
seek financing support from the European Union as a matter of
urgency. [ID:nL3E7F50X6]

Daily Publico, without citing its sources, also reported on
Tuesday that requesting a short-term loan was under
consideration.

Jornal de Negocios ran a separate column on Tuesday titled
“Game over, we have lost, Mr Engineer,” referring to Prime
Minister Jose Socrates who has insisted the country needs no
outside help.

Socrates vowed on Monday to keep resisting a foreign
financial rescue for the debt-laden country, including the
short-term loan suggested by the opposition. [ID:nLDE73328L]

Asked if a short-term loan from the International Monetary
Fund was possible if the country faces immediate financing
problems, Socrates told RTP television: “I don’t know of any IMF
financing line that would not enforce a programme with
conditions.

“All programmes that have been negotiated so far were very
severe in terms of measures demanded from a country,” he said.

Portuguese bond yields have shot higher since the government
resigned last month and credit rating agencies have downgraded
Lisbon’s creditworthiness.

Concerns over Portugal’s ability to finance itself have
spiralled as the caretaker Socialist government, which is in
place until elections on June 5, has said it does not have the
power to request a bailout.

Economists overwhelmingly expect Portugal to need a bailout
like Greece and Ireland.
(Reporting by Axel Bugge; Editing by Mike Peacock)

UPDATE 1-Portugal banks urging govt to seek loan-daily