Portugal seeks bailout as Europe debt crisis spreads

LISBON, Portugal (AP) – Portugal asked for a bailout Wednesday to relieve its crushing debt, joining Greece and Ireland by becoming the third eurozone nation to seek outside help amid a bruising financial crisis.

Prime Minister Jose Socrates went on national television to announce that Portugal must take international assistance to save its rapidly deteriorating economy, after months of insisting that he would not ask for a bailout.

Socrates said his caretaker government asked “for financial help, to ensure financing for our country, for our financial system and for our economy.”

He did not say how much Portugal would seek, but analysts have predicted Portugal will need up to euro80 billion ($114 billion). That amount is bearable for Europe’s finances unless other nations — notably Spain — end up asking for help.

Portugal urgently needs the rescue because it has been forced to pay increasingly unsustainable interest rates to persuade investors to buy its debt. Banks from Spain to Germany are heavily exposed to the possibility of a Portuguese default, which would threaten the very existence of the zone.

But analysts believe a package to save Portugal will be crafted by the European Union and the International Monetary Fund. European Commission President Jose Manuel Barroso said in a statement after Socrates’ announcement that Portugal’s request “will be processed in the swiftest possible manner.”

The IMF said Wednesday night that it had not yet received a request for financial assistance from Portugal, but added in a statement that “we stand ready to assist Portugal.”

“Ideally you want it to be bigger than the maximum you need to create that confidence that this is a once-for-all bailout,” Seiver said. “They don’t want to have to come back in a year and say, ‘You know, it wasn’t quite enough.’

Portugal has one of the 17-nation eurozone’s smallest and weakest economies and has struggled for months to finance its economy amid investor fears that it is incapable of settling its debts.

Socrates announced his resignation two weeks ago after opposition parties refused to accept additional austerity measures he proposed to stave off a bailout, but he agreed to stay on as a caretaker leader until the nation holds a special election in June.

There was confusion over whether Socrates could ask for a bailout in his current post because of doubts whether Portugal’s constitution permitted an interim leader from doing so. But Socrates said in his speech that he hoped opposition party leaders would support his decision.

“This is an especially grave moment for our country,” he said. “And things will only get worse if nothing’s done.”

Other European nations have been urging Portugal for months to accept outside help in a bid to contain the continent’s debt crisis from spreading, amid market fears that the eurozone itself could break apart if it didn’t.