Despite the fact that its parliament voted against new austerity measures, Portugal must accept reforms that go even further than the ones it just rejected as conditions for its bailout package, euro zone ministers said Friday following Portugal’s request for aid.
Reuters reported that at a meeting in Budapest on Friday, ministers from the 17 countries that make up the currency bloc discussed not just the region’s debt crisis but also Portugal’s situation. Hyrki Katainen, Finland’s finance minister, was quoted as saying, "The package must be really strict because otherwise it does not make any sense to guarantee anybody's loan. The package must be harder and more comprehensive than the one which parliament voted against."
Christine Lagarde, economy minister of France, was reported to say that she expected Portugal to propose measures that would restore confidence in the country’s economy, which is one of the weakest in the group. Negotiations on just what those measures will be are expected to be tough, since they will require not just the approval of the caretaker government but also the opposition party. The failed vote on austerity measures was largely due to the opposition, and now they must accept even more stringent measures in order for Lisbon to get a rescue package.
The failure of the vote resulted in the resignation of Jose Socrates, Portugal’s prime minister, who remains in his office as a caretaker until elections can be held on June 5. While the opposition has approved Lisbon’s request for aid, it now must accept even more restrictive measures to bring the country’s economy into compliance.
It is expected that Portugal will need 80-85 billion euros ($117.3 billion-$122.5 billion) in aid, which is less than Greece needed last year but about the same as the package extended to Ireland.