In a reversal of his previous position, Jose Socrates, caretaker prime minister of Portugal, asked for financial help for the country on Wednesday. On Thursday the country's bank stocks, which had been pummeled the day before after several were downgraded, regained some lost ground in the aftermath of what was seen as a positive sign.
Reuters reported that the opposition party, which had voted against austerity measures and prompted Socrates' resignation, supported his decision to seek aid from the European Union (EU) and the International Monetary Fund (IMF).
Experts were of the opinion that Socrates, together with the two main political parties of the country, had the authority to negotiate with the EU and IMF on the terms of the agreement. Previously, Socrates had said that as caretaker he had no such authority, but his view seemed to have changed on the matter. However, Citigroup issued a note that said in part, "without a clear political agreement on the set of policy measures to implement, the other European countries may be unwilling to sign off the deal."
While it may be too soon for celebrating on the news, Spain was clear in its relief. Elena Salgado, the Spanish economy minister, told the national radio station SER, "[The risk of contagion] is absolutely ruled out ... it has been some time since the markets have known that our economy is much more competitive."
Spain had been considered next in line for a bailout after Portugal, and worries ran high that contagion would also pull Madrid into the debt morass that so far has claimed Greece, Ireland and now Portugal. Analysts seemed to agree with Salgado's assessment that the spread of debt market problems could now be curtailed.
While Socrates did not say how much the bailout might amount to, a euro zone official in the report was cited as estimating somewhere between 60 and 80 billion euros ($85.8 billion-$114.4 billion) in loans over three years.