Merkel ‘regrets’ rejection of Portugal austerity plan

Ahead of an EU summit to bolster the euro, German Chancellor Angela Merkel urged Portugal's political parties on Thursday to stick to deficit reduction targets after the country's prime minister resigned over parliament's rejection of his austerity plan.

Merkel 'regrets' rejection of Portugal austerity plan
Photo: DPA

“Portugal has presented a very courageous programme … it was appropriate. I deeply regret that a majority was not found in parliament (on Wednesday),” Merkel told reporters.

“It is very, very important that all those who speak in Portugal’s name state clearly their attachment to the objectives of this programme,” she said ahead of a summit of EU leaders rocked by Portugal’s political and debt crisis.

“This is not only important for Portugal, but also for all of Europe and in particular for members of the eurozone,” she said.

All five opposition parties voted Wednesday against the government’s fourth cost-cutting plan in a year, increasing the chances that Portugal will follow Greece and Ireland in requiring a bailout worth billions of euros. The rejection prompted Prime Minister Jose Socrates to resign.

EU leaders plan to replace an emergency bailout fund in 2013 with a permanent war chest underpinned by stringent budgetary discipline and closer cooperation in economic policy among the 17 nations sharing the euro.

Merkel also confirmed that she would press at the summit for Berlin’s contribution to the €80-billion ($113-billion) cash element of the new €700-billion permanent bailout fund from 2013 to be staggered over five years.

Originally, Germany was to provide half of its €22-billion portion in 2013 and the rest in three installments over three years, but now Merkel wants to pay five chunks of €4.4 billion over five years.

“In the talks I intend to press for the contributions being made over five years,” she said.

This has drawn criticism, for example from Jean-Claude Juncker, Luxembourg’s prime minister and head of the Eurogroup, who said that delaying payments could rob the rescue fund of its top AAA credit rating. The remainder of the rescue fund consists of loan guarantees.

“What we are doing with this package is drawing the lessons from the debt crisis,” she said.

“The basic principle for me … is that no country in Europe will be abandoned or left to fall, because Europe only succeeds when we are one.”

AFP/The Local/mry

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