Thursday, 7 April 2011

Portugal to ask for EU financial aid

This had been looking increasingly likely for some time. From Bloomberg:

Portugal will seek a bailout from the European Union after the nation’s political crisis helped push borrowing costs to record levels and forced it to become the third euro-region country to seek a rescue.

“I tried everything but we came to a moment that not taking this decision would bring risks we can’t afford,” Prime Minister Jose Socrates said in a televised statement from Lisbon late yesterday. “The government decided to make the European Commission a request for financial aid.”

Portugal is seeking a rescue that may be worth as much as 75 billion euros ($107 billion), according to two European officials with knowledge of the situation. Bond yields have surged since Socrates offered to resign on March 23 after parliament rejected proposed budget cuts, leaving him in charge of a caretaker government with limited powers until a June 5 election.

Economic reports out of Europe on Wednesday were mixed.

Bloomberg reports a jump in German factory orders in February.

German factory orders rose almost five times as much as economists forecast in February, indicating growth in Europe’s largest economy gathered pace in the first quarter.

Orders, adjusted for seasonal swings and inflation, gained 2.4 percent from January, when they jumped 3.1 percent, the Economy Ministry in Berlin said in a statement today. Economists had forecast a 0.5 percent increase for February, according to the median of 33 estimates in a Bloomberg News survey. From a year ago, orders rose 20.1 percent.

However, Reuters reports a fall in UK industrial production in February.

Weak industrial output figures for February raised doubts about the strength of Britain's economic upturn on Wednesday, confusing the outlook for monetary policy following very strong services sector numbers...

The Office for National Statistics said that industrial output contracted by 1.2 percent in February after downwardly revised growth of 0.3 percent in January. Economists had forecast a 0.4 percent increase in industrial output over the month, yet this was the biggest fall since August 2009...

Other data on Wednesday showed a 7.9 percent annual fall in car sales and a 2.9 percent yearly fall in house prices, the biggest drop since October 2009.

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