* Reiterates bailout targets to be met
* Country has to avoid seeking second bailout like Greece
* Bailout has enough money for bank recapitalisation
By Sergio Goncalves
LISBON, Oct 25 Portugal's growing efforts to
rein in its deficit and debt may suffer setbacks if this week's
euro zone summit fails to come up with a solution to Greece's
debt crisis, Prime Minister Pedro Passos Coelho warned on
He told a conference that Portugal expected such a solution
from the summit, and said that Europe needed to move towards an
economic union to be able to take decisions quickly and ride out
"We expect the extraordinary euro zone summit to find a
solution for Greece's situation. Without this solution we won't
have financial stability in Europe and countries like Portugal
will have more difficulty," he said.
Portugal was the third country in the euro zone to need a
bailout, after Greece and Ireland.
Leaders of the 17 euro zone countries will meet in Brussels
on Wednesday to prepare a strategy to try to resolve the
region's debt problems. Still, euro zone
officials say the leaders are unlikely to provide many hard
numbers to flesh out the debt crisis response.
Passos Coelho said that while a lot depended on wider
European decisions, Portugal was focussed on meeting the goals
set out in a 78 billion euro EU/IMF bailout, including slashing
the budget deficit to 5.9 percent of GDP this year from last
year's 9.8 percent and then further to 4.5 percent in 2012.
He reaffirmed his government's commitment to meeting the
goals despite a shortfall discovered in the first half of the
year and a further expected fiscal revenue shortfall in the
second half, which he did not detail.
He said he will seek a primary budget surplus in 2012,
referring to budget accounts when interest payments are stripped
"We have now to meet our targets if we want to be taken
seriously and if we don't want to find ourselves on the edge of
an abyss again," he said.
"If we remain a country lacking financial discipline, the
price to pay will be too high from the social, economic and
political point of view," he added.
As for European banks recapitalisation needs -- another key
point to be mulled at the summit -- Passos Coelho said a 12
billion euros credit line for banks included in the country's
bailout will be enough to recapitalise Portugal's lenders.
"We have an advantage in Portugal as we already have a
solution for this recapitalisation, while other countries still
have to find other solutions... we know that the 12 billion euro
line we have in the programme will be sufficient."
Most Portuguese banks have said they had no plans to draw on
the loans, which entail the state taking stakes in banks. But
the premier said it was unlikely that all would manage to avoid
recapitalisation. He said the state would be a silent partner in
such a case, only providing recommendations on key issues.
He said the country must avoid reaching a situation of
having to seek another bailout loan from the European Union and
IMF like Greece and should instead ensure it meets the goals of
its current bailout. He has said previously that a Greek debt
default could force Portugal to seek a second loan.
"What we want is to adjust our programme to reality, not to
seek a new programme," Passos Coelho said, referring to the fact
that his government already had to take more measures than
planned under the May bailout agreement to tackle shortfalls
that have been discovered.