BAILED out Portugal has won a precious reprieve from its creditors, a day before a crucial court decision in Germany that could bring a painful end to a summertime lull in the eurozone debt crisis.
The EU and IMF yesterday agreed to relax Portugal’s deficit targets for 2012 and 2013, rewarding the Portuguese for pushing through reforms and drawing a marked contrast with the little patience shown by creditors to Greece.
“This revised path will allow the (Lisbon) government to design and implement structurally sound fiscal measures, while easing the short-term economic and social cost of fiscal adjustment,” the troika mission said.
In neighbouring Spain, meanwhile, the eurozone’s fourth biggest economy and a crisis flashpoint, the government still refused to say whether it would seek a full EU bailout, as well over a million people swamped Barcelona demanding independence for Catalonia.
But as with all players in the more than two-year-old debt crisis, Spain’s focus remains on the decision tomorrow by the German Constitutional Court, widely seen as a crunch moment for the eurozone.
On the eve of the main ruling, the Karlsruhe-based court had already rejected a last-minute legal challenge.
It said it would continue with its decision on whether German President Joachim Gauck can sign into law the European Stability Mechanism (ESM) and the European fiscal pact. Tomorrow, the Dutch go to the polls with an anti-austerity party set to make big gains; and EU leaders are to unveil plans for the first step in creating a eurozone banking union.
Greece was struggling to find $25.69 billion in spending cuts over the next two years in order to unlock $72.5billion of bailout loans it needs to stay afloat.