Portugal Skips Final Bailout Financing

Portugal has decided to forgo to a final 2.6 billion euros in funds due under its international bailout programme, choosing rather to finance itself in bond markets, reported Reuters on Friday.

Finance Minister Maria Luis Albuquerque told journalists that the decision was taken because of a “calendar incompatibility”, as the government was still waiting on the nation’s constitutional court to approve budget measures.

Portugal has decided to forgo to a final 2.6 billion euros in funds due under its international bailout programme, choosing rather to finance itself in bond markets, reported Reuters on Friday.

Finance Minister Maria Luis Albuquerque told journalists that the decision was taken because of a “calendar incompatibility”, as the government was still waiting on the nation’s constitutional court to approve budget measures.

“The government thinks that it is not the time to make decisions about substitute measures, a decision which has the consequence that we will not receive the last tranche of the programme,” she said after a cabinet meeting.

Last month, Portugal’s Constitutional Court had blocked further planned austerity measures such as reductions to state pensions and government workers’ salaries.

To receive approval for other measures would take more time, meaning that Portugal could not take on the final round of bailout funds.

Albuquerque however expressed her belief that the country could continue financing itself.

“This in no way invalidates our assumed commitments,” she said. “Market financing has reestablished,” pointing to a bond auction on Wednesday in which the country sold 975 million euros in 10-year bonds at the lowest yields in years.

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German Finance Minister Wolfgang Schaeuble said the decision by Portugal showed its bailout programme had worked.

[quote]”The decision by the government in Lisbon today shows the reform efforts have paid off,” he said. “Portugal is now managing without European aid and can stand on its own two feet. That’s a big success.”[/quote]

Portugal got a 78 billion euros rescue package in 2011 after investors lost faith in the government’s ability to repay debts. The money was released in three-month installments as long as the government met deficit-reduction targets set by the creditors – the International Monetary Fund, the European Commission and the European Central Bank.