Last-ditch moves by Portugal to avoid bailout

Portugal has announced new austerity measures in a last-ditch effort to avoid a bailout, putting the onus back on Germany at last night's meeting of EU ministers to accept a stronger financial safety net for the currency bloc.

A German government source said there were positive signals that Greece and Ireland, which received EU/IMF bailouts last year, might also announce new moves at the summit, opening the way for the EU's paymaster Germany to offer more help.

The German Chancellor Angela Merkel wants the 17 nations that share the euro to embrace a plan for stricter fiscal discipline and greater economic competitiveness before she will consider increasing the size and scope of the eurozone rescue fund.

Germany, the Netherlands and Finland, where public opinion opposes more aid for what are seen as profligate peripheral states, have opposed changes to European Financial Stability Facility such as letting it buy bonds of troubled countries or fund bond buy-backs.

A German source said Mrs Merkel could accept some easing of the terms on the Greek and Irish bailout loans if Athens speeded up promised privatisations and Dublin was more forthcoming on a common corporate tax base in the eurozone. Any decision would only be taken at a planned EU summit on 24-25 March, which is due to adopt a comprehensive response to the eurozone crisis.

But new Irish Prime Minister, Enda Kenny, said Dublin, which has an ultra-low 12.5 per cent corporate tax rate, would resist German efforts to introduce a common corporate tax base. "This would be a harmonisation of tax by the back door," he said.

Greece said weaker revenues and higher spending had widened its state budget shortfall in the first two months of 2011, blowing it off course to hit targets set by the EU and IMF.