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UPDATE 1-Portugal finance min says will need aid from EU

Published 04/06/2011, 01:57 PM
Updated 04/06/2011, 02:00 PM
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(Updates with details, background)

LISBON, April 6 (Reuters) - Portugal needs to resort to financial aid from the European Union to overcome its financial troubles, Finance Minister Fernando Teixeira dos Santos said on Wednesday.

"In this difficult situation, which could have been avoided, I understand that it is necessary to resort to the financing mechanisms available within the European framework," he said in comments reported in the online edition of business daily Jornal de Negocios.

A finance ministry spokeswoman confirmed the comments.

It was not clear from his comment whether he was referring to a short-term loan to secure financing until a June 5 snap general election or a full-fledged bailout like those received by Greece and Ireland -- and which markets widely expect Lisbon to need next.

So far the government, which will rule in caretaker capacity until the elecion, has insisted no foreign aid is necessary.

The country's leading bankers urged the caretaker government on Tuesday to urgently seek a short-term loan to soothe fears in financial markets until the election.

Portugal's bond yields have shot higher and credit rating agencies have downgraded the country's creditworthiness since the Socialist government resigned last month after parliament rejected an austerity plan.

Economists overwhelmingly believe that Portugal will eventually need a full bailout. (Reporting by Sergio Goncalves and Axel Bugge; Editing by Hugh Lawson)

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