Portugal Bailout Could Cost $99 to $114B
Thursday, March 24, 2011 at 04:19PM FORBES
After Prime Minister Socrates’ resignation right before the closing bell on Wednesday, speculation has mounted as to the future of the euro and the possibility of a bailout of Portugal by the European Union and the International Monetary Fund. While Warren Buffett said that it’s not unthinkable that the euro could collapse, analysts estimated the bail out could cost between 70 and 80 billion euro ($99 to $114 billion).
Uncertainty and a power vacuum define Portugal’s political landscape on Thursday, with Socrates still officially in charge, until his official resignation is accepted by President Anibal Cavaco Silva on Wednesday, and two days of EU summits with a powerless Prime Minister heading negotiations.
While the euro-dollar exchange rate initially tanked after Socrates’ resignation, it gathered some strength through Thursday’s session, gaining 0.66% to 1.4194 by 11:40 AM in New York. Portuguese benchmark 10-year bonds did spike, though, with yields reaching 7.85%, nearing its all-time highs since the inception of the euro zone.
Socrates, who will be at a EU summit discussing the situation of Portuguese peripherals, the so-called PIIGS, in Brussels on Thursday and Friday, will lack political authority and the leverage austerity packages would’ve granted him, according to the Financial Times. While President Cavaco Silva is expected to meet opposition parties on Friday, speculation that elections will be moved forward by two years and will be held in May or June has mounted. As different political leaders such as socialist Manuel Maria Carrilho call for Socrates to take responsibility for the “political crisis,” Socrates himself hinted he could run again for the top executive post in upcoming elections.
Reader Comments