Brussels, 18/10/2012 (Agence Europe) - Portuguese prime minister Pedro Passos Coehlo has addressed the European Council about boosting economic and monetary union (EMU) against the backdrop of the domestic situation at home (see EUROPE 10712). Diplomats suggest that there is nothing specific to be expected from the summit for Portugal, but Passos Coelho wants to ensure that the talks on a potential budget for the eurozone (mooted in the Van Rompuy Report on boosting EMU) do not interfere with the negotiations over the Multiannual Financial Framework, the EU's budget for 2014-2020. Lisbon will be carefully monitoring Germany's views on the introduction of a eurozone bank supervisory system since both countries share doubts about implementation of this new idea, particularly the section of the June 2012 European Summit conclusions document that is unclear about how direct bailouts of banks in the eurozone would operate in practice (see EUROPE 10645). Direct bank bailouts will be possible once a single eurozone bank supervisory system is up and running.
On Wednesday, the International Monetary Fund (IMF) urged Portugal to continue its budget belt-tightening, saying that austerity was needed to meet the imperative of debt reduction and winning investor confidence so the country can roll over its debt unaided on the money markets in September 2013. The government recently unveiled a new budget for 2013, which finance minister Vitor Gaspar admitted would be “tough” for the country's inhabitants with tax rises across the board and sharp reductions in public spending as required in return for the €78 billion bailout of the country granted in May 2011. The head of the IMF mission in Portugal, Abebe Aemro Selassie, welcomed the country's efforts, but said debt levels remain high and the country has to cut its debt in order to make a full recovery. (SP and MB/transl.fl)