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Merkel says Portugal reforms need to go further
Wed Mar 2, 2011 12:51pm EST
(Updates with quotes, background)
By Annika Breidthardt and Sarah Marsh
BERLIN, March 2 (Reuters) - German Chancellor Angela Merkel said on Wednesday she welcomed euro zone weakling Portugal's economic reforms but they needed to continue and go further.
Portugal is widely seen as the euro state most likely to need an EU/IMF bailout, following in the footsteps of Greece and Ireland, because it faces unsustainable market borrowing costs of more than 7 percent.
"I am of the opinion that Portugal and Spain have implemented considerable reforms," Merkel said, speaking at news conference with Portugal's Prime Minister Jose Socrates.
"Germany trusts Portugal is taking the right measures," she added, turning to Socrates: "Thank you for your courageous steps to reduce the deficit. Many structural reforms have been introduced and now depends on implementing."
She said there was no need for additional reforms but added: "The reforms must go further."
Socrates said Europe had to deliver a common answer to the euro zone crisis. He supported a competitiveness pact proposed by Germany to align economic policies more closely in the euro zone, saying that would lead to greater convergence.
He also stressed that Portugal does not need external aid.
"Since the beginning of the economic and currency crisis, or financial crisis, it is clear for me that Europe only has one possibility of delivering an answer to this crisis, by continuing with the European project," Socrates said.
Merkel also said she was prepared to discuss potential requests from Ireland for easier loan terms but added there was no decision yet on whether the aid package agreed in December needed to be changed.
Interest rate levels could not be artificially reduced because they are always an expression of confidence in a country, she said.
"If one member country has a request we will naturally deal with it," she said. "But..the Irish package is not very old yet, it was only agreed a few weeks or months ago.. Today I cannot say if we will have to change the package."
She added that Ireland could not be charged less by the euro zone rescue fund than Portugal was having to pay to refinance itself in the market. The Irish loans carry an interest rate of about 5.8 percent, whereas Portugal's borrowing costs have risen to above 7 percent on 10-year bonds.
Wed Mar 2, 2011 12:51pm EST
(Updates with quotes, background)
By Annika Breidthardt and Sarah Marsh
BERLIN, March 2 (Reuters) - German Chancellor Angela Merkel said on Wednesday she welcomed euro zone weakling Portugal's economic reforms but they needed to continue and go further.
Portugal is widely seen as the euro state most likely to need an EU/IMF bailout, following in the footsteps of Greece and Ireland, because it faces unsustainable market borrowing costs of more than 7 percent.
"I am of the opinion that Portugal and Spain have implemented considerable reforms," Merkel said, speaking at news conference with Portugal's Prime Minister Jose Socrates.
"Germany trusts Portugal is taking the right measures," she added, turning to Socrates: "Thank you for your courageous steps to reduce the deficit. Many structural reforms have been introduced and now depends on implementing."
She said there was no need for additional reforms but added: "The reforms must go further."
Socrates said Europe had to deliver a common answer to the euro zone crisis. He supported a competitiveness pact proposed by Germany to align economic policies more closely in the euro zone, saying that would lead to greater convergence.
He also stressed that Portugal does not need external aid.
"Since the beginning of the economic and currency crisis, or financial crisis, it is clear for me that Europe only has one possibility of delivering an answer to this crisis, by continuing with the European project," Socrates said.
Merkel also said she was prepared to discuss potential requests from Ireland for easier loan terms but added there was no decision yet on whether the aid package agreed in December needed to be changed.
Interest rate levels could not be artificially reduced because they are always an expression of confidence in a country, she said.
"If one member country has a request we will naturally deal with it," she said. "But..the Irish package is not very old yet, it was only agreed a few weeks or months ago.. Today I cannot say if we will have to change the package."
She added that Ireland could not be charged less by the euro zone rescue fund than Portugal was having to pay to refinance itself in the market. The Irish loans carry an interest rate of about 5.8 percent, whereas Portugal's borrowing costs have risen to above 7 percent on 10-year bonds.
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