Portuguese official favors creating European Treasury

Portugal's secretary of state for treasury and finance, Carlos Costa Pina, on Tuesday backed calls for Europe to set up a debt management agency to issue pan-European bonds, a move that is opposed by Germany and other EU members.

"European monetary union is losing solidarity mechanisms between countries," Pina told a news conference. "There has been growing talk of late on [the issue of euro-bonds]. This is an absolutely fundamental issue."

Pina rejected the need for Portugal to seek external aid, and declined to say whether it had come under growing pressure to do so. "We have to do our homework [and] consolidate our finances, Portugal is going to resolve its problems by itself."

Portugal's sovereign debt has come under sustained pressure of late on speculation it will have to follow the path of Greece and Ireland in requesting assistance from the 750-billion-euro European Financial Stability Facility (EFCF) emergency fund set up by the IMF and the EU.

The government is aiming to trim its budget deficit from a projected 7.3 percent of GDP this year to 4.6 percent next year before bringing it back within the European ceiling of 3 percent in 2012.

The idea of issuing pan-European bonds backed by the EU has been broached by Luxembourg's prime minister, Jean-Claude Juncker, who is also the head of the Eurogroup, and by Italian Finance Minister Giulio Tremonti.

Spanish Economy Minister Elena Salgado said Monday the issue of euro-bonds was a "possibility to be explored but would require changes to the [EU] Treaty. I can't see it happening immediately," she said.

The Eurogroup on Monday praised Spain's efforts to nurse its finances back to health and appease the financial markets. The government last week unveiled a new batch of measures aimed at easing concern within the investment community, including the privatization of 49-percent of the airport operator AENA and 30 percent of the national lottery to raise some 14 billion euros, and reduce the country's borrowing requirements.

Juncker said Monday the Eurogroup had studied Spain and Portugal's plans to reduce their budget deficits, with ministers "very impressed" by them.

German Finance Minister Wolfgang Schäuble said Tuesday in Brussels he was confident Portugal would "do what's necessary" to resolve its debt problems.