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UK gives £4.3bn to Portugal bailout


Britain has contributed 4.2 billion pounds to a bailout package for Portugal

Britain has contributed 4.2 billion pounds to a bailout package for Portugal

Britain has contributed 4.2 billion pounds to a bailout package for Portugal

An economic bailout package for Portugal approved by EU finance ministers includes a £4.3 billion contribution from Britain.

The £67.75 billion package, subject to strict austerity measures agreed by Lisbon, is the second to commit the UK to financial guarantees which will only be called upon if Portugal defaults on the loans it raises thanks to the EU-IMF combined bailout deal.

The first package - for Ireland - is already coming under fresh scrutiny, with Dublin using talks in Brussels on Tuesday to argue for cheaper interest rates on its bailout loans.

Meanwhile the first EU bailout package granted to Greece a year ago - with no British involvement - is also under the spotlight amid signs that the bailout system is not pulling the eurozone out of its deepening debt crisis.

Finance ministers were warned at talks on Monday night to abandon "brutal austerity" as the answer to the debt crisis and instead give struggling countries a chance to restore collapsing economies.

An emergency resolution agreed at a conference of trade union leaders in Athens said the drastic measures so far taken in the form of financial bailouts for Greece and Ireland - and now Portugal - in return for severe domestic public spending cuts were plunging the countries further into debt.

As Chancellor George Osborne joined his colleagues for a review of the Irish bailout terms and consideration of a second bailout for Greece, the general secretary of the European Trade Union Confederation, John Monks, told the ETUC Congress in the Greek capital that the EU-IMF arrangements were too tough to give scope for economic growth.

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In a letter to the ministers, Mr Monks said: "The ETUC calls on you to immediately change course. Brutal austerity, both in terms of public finance and in terms of wages, is not working but is instead undermining the economies of countries such as Greece and Ireland."

Mr Osborne, flying back to London on Tuesday afternoon, has ruled out any UK involvement in a second Greek bailout, but could not avoid a share of the Portuguese bailout burden as all EU countries are committed under a 60 billion euro European Financial Stability Mechanism which runs until 2013.

About £3.2 billion of the UK exposure will be covered by the mechanism, with the remaining £1.1 billion coming from the UK's participation in the International Monetary Fund.

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