Trouble in Lisbon.

Portugal 2010 budget deficit overshoots target

LISBON (Reuters) - Portugal's budget deficit surged past its 7.3 percent target last year, figures on Thursday showed, deepening the scale of its problems as it faces a daunting debt repayment schedule over the next three months.

The revision of the deficit to 8.6 percent of Gross Domestic Product (GDP) piled more pressure on Lisbon to follow Ireland and Greece in seeking an international bailout, sending the country's bond yields to new euro lifetime highs.

The losses followed a visit by the EU's Eurostat statistics body and are caused by higher than expected losses for a nationalised bank and public transport companies.

But they add to the problems for the government that emerges from elections which are expected within months after a debt crisis which has forced eye-watering budget cutbacks, crippled growth and forced the current administration to resign.

Finance Minister Fernando Teixeira dos Santos said Lisbon would honour its debt payments even though it has no power to seek a bailout.

"The negative element is that we are appearing more like Greece than we would like, indicating that in the past there must have been some carelessness in the accounts," said Cristina Casalinho, chief economist at Banco BPI.

"It is a question of methodology. Eurostat has made the rules tougher."

POLITICAL LIMBO

Portugal's troubles were already mounting before last week's resignation by Prime Minister Jose Socrates after parliament rejected his minority Socialist government's latest austerity measures to help to cut the budget deficit.

That move prompted downgrades by credit rating agencies and warnings by economists that the country could be forced to quickly seek a bailout.

The president is expected to decide on Thursday to call a snap election for late May or early June.

But the political limbo left by the crisis ahead of the expected election made it impossible for the interim government to seek a bailout now, Teixeira dos Santos said.

"We have to face these difficulties and understand that the government doesn't have the conditions nor the powers to ask for any kind of external help," the minister told reporters.

Portugal has to redeem 4.2 billion euros of bonds in April and 4.9 billion euros (4.3 billion pounds) in June.

"The government is not irresponsible and will guarantee that there is the necessary financing for the country to honour commitments to creditors," he said.


Opinion.

The message and recommendation for Portugal is clear yet radical. Crises such as these will be followed by ever more crises. Within the EU, a club of bankers, Portugal will be for ever a vassal state. The solution is to leave the EU and join the revitalised Commonwealth we propose. Also reconnecting with Luso-tropical Africa in order that they too together come into the fold of the Commonwealth. The Commonwealth given a real economic dimension, not for the furtherance of neo-con "free trade", but as a zone for a trans-continental managed trade and exchange, guided by an indicative economic plan formed by us all.