Portugal reaches deal on $116b EU-IMF bailout

Portugal's Prime Minister Jose  Socrates The interim government of Eurozone member Portugal has reached a "good agreement" on a three-year bailout package worth 78 billion euros from the EU and IMF, outgoing Prime Minister Jose Socrates has announced.
"I would like to announce to the Portuguese people that the government has reached agreement today with the representatives of international institutions on the programme of financial aid to our country," Socrates said Tuesday.
"The government has reached a good agreement that defends Portugal," he said in a televised address.
His office later said that Portugal is seeking 78 billion euros ($116 billion) in foreign assistance under the programme.
Officials from the "troika" of the European Central Bank, European Union and International Monetary Fund have been in Lisbon for two weeks negotiating the terms of the financial rescue package.
Socrates said the plan called for a loosening of the deficit reduction targets for Portugal, whose economy is expected to shrink this year as it implements austerity measures.
"It is a three-year programme which sets more gradual deficit reduction targets: 5.9 percent this year, 4.5 percent in 2012 and three percent in 2013," said the prime minister.
But he did not give details about how this would be implemented, saying he needed "consultations" with opposition parties.
Lisbon was forced to ask for a bailout last month after Socrates' government resigned following a parliamentary dispute and the rejection of a fourth round of austerity measures sent its borrowing costs prohibitively higher.
Investors had been steadily asking for higher rates of return to lend money to Portugal, which has to roll over billions in maturing debt this year and has a high budget deficit.
Lisbon has to have the bailout package in place by June 15 when it must repay nearly 5.0 billion euros ($7.3 billion) in maturing debt.
But the IMF stressed late Tuesday that the pact would have to be approved by the main opposition parties.
"We have said from the beginning that it is important that any programme should have broad cross-party support and we will continue our engagement with the opposition parties to establish that this is the case," a spokesman said.
Socrates underscored that the "international institutions have recognised that the Portuguese situation is a far cry from those in other countries."
Portugal is the third eurozone member to seek international assistance following Greece's 110-billion-euro rescue one year ago and Ireland's 85-billion-euro bailout last November.
Lisbon had previously aimed to reduce its public deficit to 4.6 % of gross domestic product this year, 3.0 % in 2012 and 2.0 % in 2013.
These targets were put in doubt when the national statistics office announced last month that the 2010 public deficit came in at 9.1 % of gross domestic product, above the government's target of 7.3 %.
European Union rules require the bloc's 27 member states to keep their deficits below 3.0 %, although nations may be permitted some leeway during an economic crisis.
Portugal's public debt totals nearly 160.4 billion euros or 93 % of GDP.
The government's austerity measures have hit hard, with the country's economy set to contract by 1.4 % this year according to its central bank, complicating efforts to eliminate the deficit.
The quick agreement of the terms of the rescue package means that eurozone finance ministers will be able to review the plan at their regular monthly meeting on May 16.