LUXEMBOURG (MNI) – There is a clear need for Spain and Portugal
make more cuts and employ more structural reforms beyond 2011, to bring
their high debt levels under control and restore market confidence,
Luxembourg Prime Minister and head of the Eurogroup of Euro-sharing
countries, Jean-Claude Juncker said Monday.

Increasing pressure on the euro and sovereign bond spreads of some
eurozone members prompted a E110 billion bailout of Greece and the
setting up of a E750 billion backstop fund that other countries could
use in emergency cases.

As part of that deal Spain and Portugal agreed to make more budget
cuts to help shore up market confidence.

Portugal aims to reduce its budget deficit to 7.3% of GDP in 2010
and to 4.6% of GDP in 2011, while Spain is aiming for 9.3% of GDP this
year and 6.0% of GDP in 2011. The EU-stipulated limit on budget deficits
is 3% of GDP per year.

Juncker told reporters after a Eurozone finance minister meeting in
Luxembourg that the political commitments undertaken “should not leave
any doubt our intention” on restoring fiscal discipline.

He said Eurozone ministers had committed to turn the Eurozone’s
overall “fiscal stance neutral in 2010.”

While he noted that “the measures announced (by Portugal and Spain)
are significant and courageous,” he said, “It is also clear that further
consolidation will be needed beyond 2011.”

Finance ministers also finalized plans for a E440 billion special
purpose vehicle (SPV) as part of the E750 billion backstop fund, which
will take the form of a limited liability company based in Luxembourg,
Juncker said.

European Commissioner for Economic and Monetary Affairs Olli Rehn
told reporters each country will individually guarantee its share of the
E440 billion, together with a 20% premium to provide for cases where the
fund is used.

Rehn said the conditions attached to any use of the fund would be
“based on the same kind of conditionality as the financial package for
Greece.”

“The decision making would be done in a very similar manner (to the
way decisions were taken over Greece),” he said. “It is run by a board
of directors and the Commission is in the role of contributing to the
management.”

–Luxembourg: 0032 487 (0) 32 803 665, echarlton@marketnews.com

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