March 22, 2020 / By mobanmarket
Renewed doubts over Finnish backing cast shadows over next week’s eurozone meeting.Portugal’s bail-out hangs in the balance
The finance ministers of the eurozone are aiming to approve a €78 billion bail-out for Portugal when they meet in Brussels next week, despite renewed doubts over whether Finland will back the three-year programme.
The ministers will be meeting on Monday (16 May) for the first time since the size and terms of the EU/International Monetary Fund (IMF) rescue package was finalised in Lisbon last week.
Officials from the European Commission, the European Central Bank (ECB) and the IMF worked in Portugal for almost a month to assess the country’s financing needs and set deficit-cutting conditions.
There is some urgency for finance ministers to reach agreement at their meetings of 16-17 May because Portugal needs to refinance €4.9bn of outstanding debt by 15 June. Under the terms of the European Financial Stability Facility (EFSF) – the fund set up in the wake of the Greek crisis – any bail-out has to be unanimously supported by eurozone countries.
One potential obstacle in the way of agreement is Finland, whose constitution requires its parliament to endorse any EU bail-out. Finland has been without a government since elections last month, which saw the Eurosceptic True Finns party win nearly a fifth of the vote. Jyrki Katainen, the leader of the centre-right National Coalition party, which won the largest share of the vote, supports the bail-out, but has promised to take the views of other parties into account.
Negotiations between the leaders of Finland’s political groups have so far failed to reach a conclusion and a parliamentary vote on Portugal’s bail-out that was scheduled for yesterday (11 May) has been delayed to tomorrow (13 May). The Social Democratic party has signalled that it will support Portugal’s support programme only if Finland pushes for changes to its conditions. The party wants private investors to share the cost of bail-outs.
If that hurdle can be overcome, finance ministers are expected to agree the interest rate on Portugal’s loans. Speaking in Strasbourg on Tuesday (10 May), Olli Rehn, the European commissioner for economic and monetary affairs, said that the rate would be calculated according to the IMF’s pricing policy, with “a small premium”.
“This will lead to the interest rate to be somewhere in the scale of over 5.5%, but clearly below 6%,” he said.
Wolfgang Schäuble, Germany’s finance minister, said in Berlin on Tuesday that Portugal’s programme was “ambitious” but “feasible”. “It is for Portugal to do its homework,” he said, adding that the country had to take action to improve its competitiveness.
Finance ministers are unlikely to discuss cutting the interest rate that Ireland is paying on its international loans. But Rehn has indicated that a deal is not far off, “to help Ireland overcome its debt burden, in the same way as Greece, or now Portugal”.
France is understood to be resisting Ireland’s request for a change to the interest rate for as long as Ireland persists with a low rate of corporation tax.
Click Here: Cheap FIJI Rugby Jersey
On Tuesday, Greece denied reports that it wanted further loans, amid speculation that it might have to restructure its debt. There is unlikely to be any decision next week on further financial support for Greece.
Instead, the Greek authorities are likely to come under pressure to produce evidence that Greece will meet its fiscal targets. Representatives from the EU and IMF are working in Athens this week and next to assess the situation, one year on from Greece’s €110bn bail-out.
Angela Merkel, Germany’s chancellor, said that it was too early to decide whether the Greek government would need more financial help to overcome the debt crisis.
“First, we need to hear what the status is. Only then can I decide what, if anything, needs to be done,” she said yesterday.
? See Pages 10 and 19
Categories: News