Germany as the Next World Superpower

Portugal Under Pressure from Germany, France to Seek EU/IMF Aid

January 9, 2011

Reuters - Pressure is growing on Portugal from Germany, France and other euro zone countries to seek financial help from the EU and IMF to stop the bloc's debt crisis from spreading, a senior euro zone source said on Sunday.

Some preliminary discussions on the possibility of Portugal asking for help if its financing costs on markets become too high have taken place since July, the source said.

No formal talks on aid have started yet, a number of euro zone sources said, but the pressure was rising in the Eurogroup, which brings together euro zone finance ministers.

"France and Germany have indicated in the context of the Eurogroup that Portugal should apply for help sooner rather than later," the senior source said, adding Finland and the Netherlands had expressed similar views.

But Germany denied any pressure.

"It is not the strategy of the German government to push Portugal to take the bailout," said Steffen Seibert, German Chancellor Angela Merkel's spokesman.

Earlier on Sunday, a Portuguese government spokesman denied a German magazine report that Lisbon was under pressure from Berlin and Paris to seek a bailout from the European Union and International Monetary Fund.

Leading Portuguese newspaper Publico on Sunday joined the ranks of those who think a bailout is inevitable.

"Only a miracle will save us from the IMF," a Publico editorial read.

Many policymakers hope EU/IMF financing for Portugal would ring fence the euro zone debt crisis, in which Greece and Ireland have taken bailouts.

Before Ireland got its 85-billion-euro ($109.7 billion) bailout late last year there were reports of pressure from core euro zone countries for Dublin to accept an aid package.

Lisbon has repeatedly denied it is facing pressure or needs a bailout in recent months -- there have been frequent reports that such help may become necessary.

Help for Lisbon would aim to protect Spain, which might be next in line, but whose financing needs would stretch current euro zone aid capabilities to the limit.

"The real battle will be the battle of Spain -- but there I think we have much higher chances of success," the source said.

Asked to estimate the possible size of a program Portugal could need, the source said:

"More than 50 billion euros and less than 100 billion euros, say between 60 and 80 billion, but this is off the cuff, because we don't know the needs of the Portuguese banking sector."