Portugal bailout eases suffering in markets

The 78-euro-billion bailout agreed Tuesday by the caretaker government of Portuguese Prime Minister José Sócrates yesterday eased the pressure on the country's debt in the secondary markets, but left labor unions angry at the sacrifices accompanying the loan.

The debt-management agency IGCP yesterday issued 1.117 billion eurosin three-month bills, above the upper range of its target of 1 billion euro on heavy demand. However, it had to pay a yield of 4.652 percent, up from 4.046 percent at the previous three-month bill auction held on April 20.

The yield on the benchmark 10-year bond was trading at levels of around 9.4 percent, with the spread with the German equivalent easing by 30 basis points to 610 basis points.

But what Sócrates described as a "good deal" for the country involves tax hikes, a freeze in public-sector wages, a slimming down of the administration's payroll, a special levy on pensions over 1,500 euro a month and cuts in education and healthcare spending to shave 10.4 billion eurosoff the public deficit through to 2013.

The head of the CGTP union, Manuel Carvalho da Silva, rejected Sócrates' claim that the deal did not involve a great deal of pain and announced a series of protests against what the Communist Party described as a "brutal austerity package" that is likely to condemn the country to recession for two years.

The agreement is still not a done deal as the European Commission and the International Monetary Fund need to seal the support of the main opposition parties.