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Portugal denies report on bailout

Portugal and the European Commission denied a published report on Friday that most euro zone countries and the European Central Bank were putting pressure on Lisbon to seek a bailout.

business Updated: Nov 26, 2010 21:48 IST

Portugal and the European Commission denied a published report on Friday that most euro zone countries and the European Central Bank were putting pressure on Lisbon to seek a bailout.

"This news article is completely false, it has no foundation," said a government spokesman. Lisbon is preparing to pass an austere 2011 budget that it hopes can deliver tough spending cuts to ward off the euro zone debt crisis.

The Financial Times Deutschland reported on Friday that a majority of euro zone countries and the European Central Bank were pressing Portugal to follow Ireland and Greece and seek aid from the European Union and International Monetary Fund.

European Commission President Jose Manuel Barroso, a former Portuguese prime minister, said there was no talk of a bailout for his home country.

"I can tell you that it's absolutely false, completely false," he said.

Economists have said Portugal is the likely next weak euro zone country to need a financial rescue as it struggles with low competitiveness and a high budget deficit.

"The market is now assuming a bailout for not just Portugal but also Spain, but it is moving slowly with the officials reluctant to concede it will happen," said Peter Chatwell, a rate strategist for Credit Agricole in London.

Prime Minister Jose Socrates has denied that his country needs a bailout and has underlined that Lisbon will do everything possible to meet goals to cut the budget deficit.

Meanwhile, yields on Ireland’s bonds reached a new euro-era high on Friday as investors dumped the nation's debt securities, and Irish bank shares also kept falling in expectation the banks are heading toward greater state ownership.

Analysts said Ireland’s bonds and banks are getting battered because deep skepticism remains that an international bailout loan will be enough for Ireland to resolve its debts.