Portugal to get €80bn as protesters demand ‘no cuts’

George Osborne says Britain will not make a direct loan to battered Lisbon government
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Some 30,000 anti-cuts protesters descended on Budapest this weekend, where European finance ministers were thrashing out the details of Portugal's €80bn (£71bn) bailout.

The EU's Ecofin (Economic and Financial Affairs Council) meeting on Friday and Saturday, held in a castle just outside the Hungarian capital, was dominated by the Portuguese financial crisis. On Thursday, Portugal finally bowed to the inevitable and asked for international help.

The rescue deal will see the EU and the International Monetary Fund (IMF) hand over money in exchange for the deep austerity cuts that have so angered the protesters.

The European Commission, European Central Bank and IMF have sent a delegation to Lisbon to agree technical aspects of the bailout by mid-May. This is similar to the way negotiations panned out in the Greece and Ireland rescues.

Greece has seen civil servants forced to take pay cuts of up to 30 per cent, while Ireland is expected to see consumption fall by 4.5 per cent this year. The cuts imposed on Portugal are likely to be tougher than those the country's parliament rejected last month, which led to the resignation of the Prime Minister, Jose Socrates. A general election will be held in June.

Protesters argued that these bailouts and other public-sector cuts across Europe risk destabilising the economy. A spokeswoman for the European Trade Union Congress (ETUC), which arranged the demonstration, said: "We represent the same message: 'No to these austerity measures'."

British workers were represented by Dave Prentis, the general secretary of the public service union Unison. The former Trade Union Congress boss Lord Monks is now the general secretary of ETUC and said of Ecofin discussions on public-sector pay: "It's always about pushing wages down, never about condemning policies that squeeze wages to the bone."

Another Briton in Budapest was George Osborne. The Chancellor insisted that the UK would not make a direct loan to Portugal, though the taxpayer will still cough up £4.4bn through EU and IMF commitments. The UK did make a direct loan to Ireland, but that was due to the amount of trade between the countries.

Fears are receding that Spain will also be forced to seek international loans. Its Finance Minister, Elena Salgado, said that it will force all of its banks to undertake European-approved stress tests to prove the strength of the country's financial services sector.

The US President, Barack Obama, agreed to $38bn of spending cuts on Friday in what has been viewed as a victory for the opposition Republicans. Mr Obama said: "Both sides had to make tough decisions and give ground on issues that were important to them. Some of the cuts we agreed to will be painful."