Portugal puts €6.6bn into banks

Bailout comes as EU debates using common funds to save finance sector

A protesting worker waves a Portugese flag
A protesting worker waves a Portugese flag. Photograph: Getty Images

The Portuguese government will inject €6.6bn into three of the country’s largest banks, using money from the country's €78bn EU-International Monetary Fund rescue programme. €12bn of the money had been earmarked for saving the nation's banks, and with the injection of capital in to Banco Commercial Portugues, Banco BPI and the state-owned Caixa Geral de Depósitos, that is what it is being used for. The hope is that the cash injection will help the banks meet the stringent capital requirements of the European Banking Authority.

There is growing recognition that the eurozone crisis is as much a problem of banking and balance of payments as it is of sovereign debt, and the Portugese move is just the latest action by a Government to offset that.

There is disagreement within the EU over the role of the Union in dealing with the banking crisis, with the Olli Rehn, the European Commissioner for Economic and Monetary Affairs and the Euro, and Pierre Moscovici, the new French finance minister, calling for the eurozone’s €500bn rescue fund to be allowed to inject capital directly in to struggling banks &ndash a move opposed by Germany, which is concerned that the aid may come without the tough controls that lenders have managed to impose on sovereign bailouts.

Portugal’s international creditors announced that the country was implementing its bailout "broadly as planned", but EU officials are increasingly planning for a second bailout for Lisbon.

The Financial Times reports that:

Borrowing costs on Portugal’s benchmark 10-year bonds have remained above 10 per cent for more than a year – far too high for it to return to the private sector for financing next year, as the plan envisages.