Portugal, Spain deny bailouts in the offing

Portugal on Friday has denied it was under pressure from the European Central Bank and other eurozone members to accept financial help as the Spanish premier Jose Luis Rodriguez Zapatero rules out any Irish-style rescue for the Spanish economy.

Reuters

Eurozone members are urging Portugal to apply for a bailout much like Ireland, the German newspaper Financial Times Deutschland wrote on Friday.

The Portuguese prime minister's office however said the report was "totally false", a claim Germany confirmed on Friday, saying it was not leaning on Portugal to seek aid from the EU's bailout fund.

Without citing any sources, the FTD said Portugal was being pressed to apply for help to save Spain, the EU’s fifth largest economy, which is seen as a potential bailout candidate.

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

On Thursday, Portugal was paralysed by a general strike to protest drastic cuts and tax hikes which are being pushed through parliament. The measures should help reduce the country’s public deficit which stands at 7.3 per cent, and save the country from a bailout.

Portugal’s parliament is set to give the measures a final reading on Friday.

Although Portugal has denied it will seek to tap the 750-billion-euro fund, analysts believe it is next in line, after Ireland and Greece to get help, and there are fears that Spain will follow suit.

Spain’s Prime Minister Jose Luis Zapatero “absolutely” ruled out his government would be applying for rescue packages on Friday.

However, eight of Spain’s 17 regions are expected to bust government-imposed public deficit targets for 2011, raising fears over the health of the Spanish economy.