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Portugal fund 'could cost UK £3bn'

Britain may have to pledge more than £3 billion towards an emergency EU bailout for Portugal, it has been claimed.

The warning came as a new economic crisis overshadowed an EU summit in Brussels the day after Chancellor George Osborne unveiled a carefully-balanced "Budget for growth".

Prime Minister David Cameron is travelling to the summit for talks on strengthening European economies and staving off further financial crises following bailouts for Greece and Ireland.

But now Portugal looks set to demand a massive bailout after the collapse of the Lisbon government's austerity plans and the resignation of prime minister Jose Socrates on Wednesday night.

Mr Cameron cannot opt out if Portugal comes cap-in-hand, even though the UK is not a eurozone member state.

Ironically, EU leaders are due at the summit to sign up to a new, permanent, 700 billion euro (£607.5 billion) bailout facility for eurozone countries in trouble.

The UK will not be liable for any contributions from that fund - but it is included in the current, temporary 440 billion euro (£382 billion) bailout fund set up to help Greece and which runs until mid-2013.

The temporary fund has also bailed out Ireland, and will be used again if Portugal needs support to prop up its economy and to try once more to restore the credibility of the euro. The UK is committed to contribute under a deal signed up to by then chancellor Alastair Darling - a deal fiercely opposed by Mr Osborne, who has since become Chancellor.

In a new report, Open Europe estimates the UK's share of such a bailout as anything between 810 million euro (£702 million) and 3.7 billion euro (£3.2 billion), "with the higher end of the estimate being more likely".

The think-tank says that, despite not having a veto on participating in such a bailout, the UK should make its involvement conditional on a comprehensive Portuguese economic restructuring programme being agreed first.


From Belfast Telegraph