Portugal edges closer to second Eurozone bailout

PORTUGAL’S government successfully issued short-term debt yesterday, despite growing worries the country may follow Greece in requiring another bailout.

The country’s core public deficit nearly tripled in the first two months of 2012, showing a deepening slump is denting tax collection and stoking concerns the country may miss its budget targets.

The gap widened to €799m (£677m) from €274m a year earlier, showing the debt-laden nation has its work cut out to hit fiscal targets under a €78bn EU and IMF bailout even after closely following the creditors’ austerity plan.

However, it did manage to sell almost €2bn in short term debt, paying interest rates of 3.6 per cent on 12-month bills and 2.16 per cent on four-month debt, well down on yields paid last month.

Earlier this week, finance minister Vitor Gaspar dismissed suggestions that Portugal, facing its worst recession since the 1970s, is slipping behind the deficit reduction and reform timetable set under the bailout programme.

He ruled out asking for more rescue funds but many economists fear Portugal will be forced to follow Greece’s lead in requesting a new bailout or even restructuring its debt. The government insists none of this will be necessary.