Obama vows to work with Europe, Portugal on debt crises
LISBON ? US President Barack Obama vowed here Friday to work with Portugal and all of Europe as Lisbon tries to cut public debt and soothe financial market fears.
Portugal, struggling with a substantial public debt and deficit, has had to pay dearly to borrow money on the bond market and has been under pressure to shore up public finances.
The country's parliament has approved a severe austerity budget including salary cuts for government workers, which drew tens of thousands of protesters into the streets.
"Obviously, Portugal is working through challenges created by financial markets," Obama said after meeting with Prime Minister Jose Socrates ahead of a two-day NATO summit in Lisbon.
"I think that it's important to note that the prime minister has committed himself to a very vigorous package of economic steps, and we are going to be working with all of Europe as well as Portugal to support these efforts."
Portugal's premier said there was a broad agreement with Obama about the need for regulation of the financial markets.
President Anibal Cavaco Silva said after separate talks with US leader that they had discussed finance and the economy. "And I was happy to hear the US authorities reiterate their trust on the Portuguese capability to overcome the challenges it is faced with."
Both Spain and Portugal are trying to prevent market concerns about the devastation in Ireland's banking sector spreading to their countries and triggering a new Greek-style debt crisis.
On Wednesday, Finance Minister Fernando Teixeira dos Santos told parliament his country remained able to raise funds on the bond market at current interest rates.
The government raised 750 million euros in an auction of one-year bonds earlier in the day.
But it was forced to offer sharply higher yields at a time when fears are growing for the financial health not only of Portugal but several other troubled eurozone members as well.
The minister, in comments carried by the Financial Times on Monday, said Portugal was at a high risk of needing an EU bailout because of the danger of contagion from other nations -- principally Ireland.
"The risk is high because we are not facing only a national or country problem," Teixeira dos Santos said.
But he later stressed that Portugal had had "no contact with (European Union) authorities in Brussels, neither formally nor informally, regarding European assistance."
Portugal's public debt agency earlier said the government had already met 93 percent of its 2010 finance needs. It said foreign investors accounted for purchases in its last bond auction.
International financial experts and Irish officials began negotiations Friday on a possible bailout for the debt-ridden economy.
The enormous debt burden weighing on Ireland, as well as on Portugal, have raised fears in European financial circles that the future of the European single currency could be at stake.
IMF spokesman Caroline Atkinson said Thursday it believes Europe has "ample ability" to help Ireland cope with its debt crisis.
"We have worked with them," Atkinson said, referring to European Union officials. "We have ample resources, the Europeans have ample ability to act, as and when needed."
In London morning trade, the euro climbed to 1.3706 dollars from 1.3644 dollars late in New York on Thursday.
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