LISBON (MNI) – It is “premature” to talk about exact maturities and
interest rates on the EU portion of loans in a E78 billion bailout
package that Portugal has agreed with the European Commission, European
Central Bank and IMF, Lisbon’s caretaker Finance Minister Fernando
Teixeira Dos Santos said Thursday.

Addressing the nation in a live television broadcast, Dos Santos
said the interest rates charged by the EU still needed to be decided and
would be tied in some way to market rates. He said maturities on the
loans would be longer than the three-year duration of the adjustment
program, but that the exact length of the loans was yet to be
determined.

Dos Santos spoke just moments before a separate press conference by
the head negotiators from the ECB, IMF and European Commission, in which
it emerged that the loans from the IMF would carry an interest rate of
3.25% for the first three years and 4.25% in subsequent years.

Juergen Kroeger, head of the European Commission delegation, said
the rate on the loans provided by the European Financial Stability
Facility would be higher than the IMF was charging, though he did not
specify.

Kroeger also noted that the IMF would provide about E26 billion of
the total and the EU would contribute E52 billion. That is in keeping
with the aid packages for Greece and Ireland, in which the EU-IMF split
has been roughly two to one.

Dos Santos said that according to government calculations, the E78
billion provided in the program would be enough to meet the country’s
needs. He noted that the plan rewards entrepreneurship, promotes
competition and competitiveness, and gets the state largely out the
economy.

The government, Dos Santos said, will privatize the “totality” of
its stakes in businesses. It will also reevaluate the main 20
public-private partnerships, he said.

The finance minister said the plan was “good” but that the required
measures are “demanding.” Its execution and implementation will be “very
demanding,” he added.

The budget cuts envisioned in the program would contribute to an
expected GDP contraction of 2% this year and next, with growth returning
in 2013, Dos Santos said. He said it is “critical” that that all main
political parties agree on implementing the plan.

He also said the plan will resolve structural problems that have
limited growth in Portugal and that it includes measures for the
financial sector that will ensure banks can finance the economy. Santos
enumerated three pillars the programme is based on: stabilizing public
finances; reforming labor market to make it more flexible; rewarding
entrepreneurship.

According to the minister, the starting point for the plan was the
defeated government austerity plan that led to downfall of Prime Minster
Jose Socrates’ government. From 2012, the measures that will be applied
are essentially from the defeated austerity program, with some extra
measures to reinforce fiscal consolidation, he said.

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