LISBON - The interim government of Portugal signed on Thursday an agreement to receive 78 billion euros in loans from the European Union and the International Monetary Fund (IMF) warned that the terms of the bailout will lead the country into recession this year and next.
Portuguese Finance Minister Fernando Teixeira dos Santos, confirmed what sources told Reuters - the economy will shrink by 2 percent in 2011 and 2012 as a result of higher taxes and deep cuts in public spending, measures required by the rescue agreement .
The director of the IMF mission in Portugal , Poul Thomsen, told reporters that Portugal's economy will face "significant barriers in the next three years" and that the country must become more open to competition to get growing again.
The IMF will lend 26 billion euros and the remainder will come from the EU. Portugal is the third country in the eurozone to ask for foreign aid after redemptions of 110 billion euros to Greece and 85 billion euros to Ireland.
Teixeira dos Santos said that taxes consumption rather than income, will be high and that the ratio of debt to Gross Domestic Product (GDP) of Portugal will continue rising until 2013.
"This is a program to return to growth and employment," he told reporters.
The interim prime minister of Portugal, Jose Socrates, said on Tuesday that Lisbon had found a deal on a rescue package of three years, after weeks of negotiations.
Socrates resigned in March after parliament rejected the plan of fiscal austerity of his minority government.
The bailout agreement includes up to 12 billion euros for recapitalization in the banking sector and requires banks to raise Tier 1 capital to 10 percent by the end of 2012, according to an official source.
The plan also aims to 5.3 billion euros for privatization by 2013.
The interest rate for the loan of Portugal must be established during a meeting of finance ministers of the euro area in mid-May.
Portugal needs to approve the terms of the loan until June 15, when Lisbon to pay 4.9 billion euros in salary bonuses.
Portuguese Finance Minister Fernando Teixeira dos Santos, confirmed what sources told Reuters - the economy will shrink by 2 percent in 2011 and 2012 as a result of higher taxes and deep cuts in public spending, measures required by the rescue agreement .
The director of the IMF mission in Portugal , Poul Thomsen, told reporters that Portugal's economy will face "significant barriers in the next three years" and that the country must become more open to competition to get growing again.
The IMF will lend 26 billion euros and the remainder will come from the EU. Portugal is the third country in the eurozone to ask for foreign aid after redemptions of 110 billion euros to Greece and 85 billion euros to Ireland.
Teixeira dos Santos said that taxes consumption rather than income, will be high and that the ratio of debt to Gross Domestic Product (GDP) of Portugal will continue rising until 2013.
"This is a program to return to growth and employment," he told reporters.
The interim prime minister of Portugal, Jose Socrates, said on Tuesday that Lisbon had found a deal on a rescue package of three years, after weeks of negotiations.
Socrates resigned in March after parliament rejected the plan of fiscal austerity of his minority government.
The bailout agreement includes up to 12 billion euros for recapitalization in the banking sector and requires banks to raise Tier 1 capital to 10 percent by the end of 2012, according to an official source.
The plan also aims to 5.3 billion euros for privatization by 2013.
The interest rate for the loan of Portugal must be established during a meeting of finance ministers of the euro area in mid-May.
Portugal needs to approve the terms of the loan until June 15, when Lisbon to pay 4.9 billion euros in salary bonuses.
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