Portugal's clean bailout exit more likely after Greek bond success: Eurogroup head

WASHINGTON Fri Apr 11, 2014 4:55pm EDT

Netherlands' Finance Minister Jeroen Dijsselbloem attends the Asian Financial Forum in Hong Kong January 13, 2014. REUTERS/Tyrone Siu

Netherlands' Finance Minister Jeroen Dijsselbloem attends the Asian Financial Forum in Hong Kong January 13, 2014.

Credit: Reuters/Tyrone Siu

WASHINGTON (Reuters) - Greece's success in tapping markets on Thursday raise the chances that Portugal will not need a precautionary credit line when it exits the euro zone bailout in mid-May, the head of euro zone finance ministers, Jeroen Dijsselbloem, said on Friday.

Athens, which had been locked out of capital markets for four years and was bailed out with 240 billion euros ($333 billion) as its economy faltered, issued a bond on Thursday and received bids seven times the amount on offer.

The transaction buoyed other euro zone government bond markets on Thursday, lowering the costs of borrowing also for other countries under euro zone programs like Portugal which will exit its bailout in mid-May.

If investors are sufficiently bullish on Portugal's prospects, the country would not need to ask for a precautionary credit line from the euro zone to make sure it is always sufficiently financed.

That is a more attractive option for Portuguese politicians, because no precautionary credit line means no more tough external control of economic policy.

"If spreads go down, the possibility of not having a precautionary program is improving," Dijsselbloem told Reuters in an interview on the sidelines of the International Monetary Fund's annual meetings.

"It is very helpful for Portugal, which is economically doing surprisingly well. But the Portuguese government is still considering all options, talking to all institutions and looking at how markets are developing," he said.

He said he strongly advised Portugal to use all the time available to reach a decision.

"Their program ends in mid-May, so they have until the beginning of May to make a decision. On May 5 we have a meeting of euro zone finance ministers, we will come back to it," he said.

GREECE NOT FULLY BACK TO MARKETS YET

Dijsselbloem cautioned, however, that despite the success of the Greek bond issue, Athens could not yet talk about a full return to market financing.

"You have to realize that going to the markets once with one kind of bond does not mean you have full markets access, that you are fully able to refinance your European loans at a reasonable price," he said.

"So that's why I am a little careful to go along with the over-optimistic people who say this is the end of the Greek situation. It is not. Greece still has a long way to go," Dijsselbloem said.

Greece, which reached a primary budget surplus last year, has said that it does not want to borrow more from the euro zone. But its debt is still around 176 percent of GDP.

"The Greek government has the ambition not to have another program, but if you look at the size of the state debt and the refinancing needs over the next couple of years, that is still a major challenge for Greece," Dijsselbloem said.

Euro zone ministers will debate how much more Greece might need in additional financing in the fourth quarter.

"We will work with the European Commission and the International Monetary Fund to get the financing figures for 2015 and beyond, and talk to the Greek government after the summer to see what is needed," Dijsselbloem said.

(Reporting By Jan Strupczewski; Editing by Sandra Maler)

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