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Portugal 'under pressure to seek aid'

Berlin, November 26, 2010

Euro zone nations and its central bank are urging Portugal to apply for a financial bailout from a European rescue fund, Financial Times Deutschland reported on Friday.

Without revealing its sources, the paper said a majority of euro zone countries and the European Central Bank were putting pressure on Portugal to follow Ireland and Greece and seek aid in order to save Spain -- European Union's fifth-largest economy -- from having to do the same.

The paper quoted a source in Germany's finance ministry as saying: 'If Portugal were to use the fund, it would be good for Spain, because the country is heavily exposed to Portugal.'

The German Finance Ministry could not immediately be reached for comment on the report which suggested that despite public displays of confidence, euro area leaders were alarmed at the prospect of the debt crisis engulfing ever more of its members.

Many analysts believe Portugal will be the next nation to seek assistance from the EU's 750 billion euro rescue fund, and there are fears that Spain might be forced to follow suit.

On Thursday, top EU officials sought to assure markets that there was no risk of the euro zone breaking up after investors, stung by Ireland's debt crisis, pushed the borrowing costs of Portugal and Spain to record highs.

German Chancellor Angela Merkel, who unsettled markets by her comment this week that the euro was in an 'exceptionally serious' situation, said she was confident the euro area would emerge stronger from the crisis.

Europe was now showing 'more solidarity than a year ago', she told a conference in Berlin.

The chairman of euro zone finance ministers, Jean-Claude Juncker, pitched in saying in a newspaper interview he was not worried about the survival of the euro.

And Klaus Regling, chief of the euro's financial safety net, European Financial Stability Facility (EFSF), was even more emphatic when asked by German daily Bild about the risk of the euro area falling apart: 'There is zero danger. It is inconceivable that the euro fails.'

Some economists and commentators, mostly in Britain and the United States, have suggested the bloc launched in 1999 could split because of high debts and deficits of nations on its periphery and their inability to compete with Germany.-Reuters




Tags: Euro zone | Portugal |

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