Europe denies there are Portugal bailout plans

European Commissioner Jose Manuel Barroso has denied reports that euro area member states are putting pressure on Portugal to ask for external financial aid.

Speaking in Paris today, Barroso said there was no talk of a Portugal bailout and no application had been made.

“I can tell you that it’s absolutely false, completely false,” commenting on a report in the Financial Times Deutschland today.

The FT Deutschland said some euro area states want Portugal to follow Ireland’s lead and apply for external aid to ensure no further contagion is experienced.

“If Portugal were to use the fund, it would be good for Spain, because the country is heavily exposed to Portugal,” the FT Deutschland quoted a source in Germany’s finance ministry as saying.

Lisbon is preparing its 2011 budget which it is due to release later today. Austere measures are expected to try and fix its deficit and debt problems.

The country’s Government has denied the news report and is adamant it does not need external aid.

“This news article is completely false, it has no foundation,” a government spokesman said when asked about the reports.

Prime Minister José Sócrates has repeatedly denied that his country needs a bail-out despite spiralling debt costs and ongoing investor fears pushing up the cost of borrowing.

The Government aims to cut the deficit to 4.6pc of GDP next year from 7.3pc this year.

Finance minister Fernando Teixeira dos Santos told the daily Jornal de Noticias that some countries in the euro zone think the best way of defending the euro is to push countries to seek aid.

“I don’t want to refer to this or that country, much less Germany,” he said when asked if Germany was pressurising Portugal to follow Ireland’s lead and take outside help.

“But there (are) among our partners in the European Union those that think that the best way of preserving stability in the euro area is to push and force those countries that have been in the spotlight to seek aid,” he said.

Separately, Spain has also ruled out the possibility that it may need a bailout to sort out its public finances and government debt.

The Spanish government has stepped up efforts to ease investor fears. It says extra health checks on its savings banks will be published in 2011.

The premium on its government bonds hit a record high of 5.2pc today as all peripheral economies are hit by low market confidence.