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Friday 3 February 2023 Dublin: 10°C
AP Photo/Michel Euler British Prime Minister David Cameron speaking with Taoiseach Enda Kenny at the summit yesterday.
# Summit
Portugal worries dominate EU summit as Ireland's bailout talks delayed
Ireland could be in for weeks of negotiations on a reduction in its bailout rate, but all eyes are on Portugal now – will it be next for a bailout?

EUROZONE STABILITY WORRIES are likely to remain the central focus of today’s second day at the EU leaders’ summit in Brussels, as speculation mounts that Portugal will be next to require major financial assistance.

Portugal’s political crisis and its affect on the country’s financial stability have dominated the summit.

The prime minister Jose Socrates quit on Wednesday after his minority government failed to persuade parliament to pass austerity measures in Socrates’ fourth budget in just 11 months.

However, the head of the ECB Jean-Claude Trichet said yesterday that it was crucial for Portugal to stick to that austerity plan and “to confirm the plan that had been designed, and approved by the Commission in liaison with the ECB” earlier this month, Reuters reports.

Credit ratings agency Standard & Poor’s has downgraded Portugal’s credit rating by two notches to BBB and is keeping them on watch for further downgrades, Dow Jones reports. S&P said it might even cut it by one more notch, bringing it to within one of junk status, when the EU’s new stability mechanism measures are announced in detail.

Meanwhile, the Irish government faces weeks of negotiations to persuade the EU to reduce the rate of the bailout loan, the Examiner reports.

It was clear earlier this week that Ireland’s bailout deal would not be tabled at the EU summit. Any decision on Ireland’s bailout rate will not be made before the results of Irish bank stress tests have been released late next week.

The restructured €500bn eurozone bailout fund will go into effect from 2013, but will require an initial €80bn investment by eurozone members. The Financial Times (subscription required) reports that a further €620bn in guarantees and callable capital will mean the full €500bn of the fund will be available to cash-strapped countries.