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Portuguese FinMin: Europe must do more for euro

By Barry Hatton

Associated Press

Published: Tuesday, Jan. 11 2011 4:36 a.m. MST

Portuguese Prime Minister Jose Socrates, with Finance Minister Fernando teixeira dos Santos, right, addresses journalists flanked by Portuguese and European Union flags, Tuesday, Jan. 11 2011, at his official residence, the Sao Bento palace in Lisbon. Socrates called a news conference to announce that Portugal cut the 2010 budget deficit to below its target of 7.3 percent of gross domestic product, according to provisional data.

Armando Franca, Associated Press

LISBON, Portugal — Portugal does not need a bailout but its European partners are not doing enough to shield the euro currency from the debt crisis, top officials from the debt-burdened country said Tuesday.

Portugal is edging closer toward needing financial rescue and the government appears worried at the lack of help from its fellow EU member states to avoid that scenario — France and Germany are reportedly pushing it to give in to market pressures and take a bailout like Ireland and Greece.

Finance Minister Fernando Teixeira dos Santos, acknowledging Portugal's problems are continuing despite government efforts to restore market confidence, said on TSF radio, "We are doing our job. Clearly, Europe is not doing its job to defend the stability of the euro." He did not elaborate.

Prime Minister Jose Socrates said Portugal is making progress in reducing its budget deficit.

Preliminary data indicated that last year's deficit would be below the government's target of 7.3 percent, he said, adding that it would be one of the sharpest reductions in the 17-nation eurozone.

He said the government would continue its austerity program, including pay cuts and tax hikes, to drive down the deficit to 4.6 percent this year.

The 2009 deficit of 9.3 percent was the fourth-highest in the eurozone after Greece, Ireland and Spain, spooking markets and bringing a potentially unsustainable surge in the national borrowing rates.

Portugal's problems of high debt and low growth have contributed to wider market concerns about the soundness of the eurozone.

"The government is doing its job and is doing it well," Socrates told a news conference. "I'd like to stress again that ... Portugal won't request any financial help for the simple reason that it doesn't need it."

Socrates said Portugal will continue to seek loans on international markets, even though its 10-year bond yields — a key gauge of investor sentiment — have recently reached euro-era records of around 7 percent as investors demand higher premiums for risking their money on Portugal.

He said forecasts indicated economic growth reached 1.3 percent last year. However, analysts expect a recession in 2011 for the second time in three years.

A critical moment in the near-term will come Wednesday, when the government aims to raise up to €1.25 billion by auctioning off 3-year and 9-year bonds. Portugal must ask investors for €20 billion this year to finance public accounts.

If Portugal does not get enough investor backing, it could generate a new wave of international concern about the currency and hurt debt offerings the following day by Spain.

The yield on Portugal's 10-year bonds dipped to 6.90 percent from just over 7 percent on Monday, compared with benchmark German bonds which were slightly down at 2.86 percent.

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