this is a excellent article on the growing turmoil in the world of capitalism from this week's socialist. The newspaper from the Socialist party where you can find more excellent articles each week at
www.socialistparty.org.uk
As their system continues to slide further into its worst crisis since the 1930s, the frantic efforts of world capitalist leaders to reverse the process are farcical, contradictory and ineffective. "Financial markets at their wits' end", was the headline in the Financial Times.
In a matter of weeks, trillions of dollars have been wiped from equity market values worldwide. The rush out of equities (shares in companies, banks etc) to alleged 'safe havens' of gold is now greater than at the time of the collapse of Lehman Brothers in 2008. This indicates the depth of the present crisis which threatens to become a prolonged slump.
The credit-worthiness of the USA, the most powerful economy in the world, has been questioned. Eurozone leaders are stumbling from one summit to another without being able to solve the crisis.
On Friday 5 August, the credit rating agency Standard and Poor (S&P), downgraded US government bonds from AAA to AA+. This, they said, was due to the debacle between Democrats and Republicans over the debt ceiling for the US - now standing at $14 trillion, the highest in the world. These are the very same 'experts' who gave an AAA rating to the sub-prime lending spree in the first place which helped to lay the basis for the present crisis.
Big investors in US 'treasuries', including the Chinese government, are still not likely to move out significantly, but China's official People's Daily newspaper took the opportunity of the S&P assessment to chide the US government with its own interests in mind. It should not "become blind to the great risks that a weak greenback could pose to the world's fragile economic recovery by lifting dollar-denominated commodities prices", it wrote.
Double-dip recession
The S&P found the sums on which it based its assessment were wrong - by $2 trillion - but, pessimistic as they are about growth prospects, they still believed that lenders would have doubts about buying US government bonds. The latest figures for January to July show the US economy already crawling along at a rate of just 0.8%.
The US economy is now almost certainly facing a 'double dip' recession. There are legitimate fears, now widespread, that the austerity measures being imposed in the US and many other countries to tackle high levels of debt, will actually stifle their already weak economic recoveries and plunge them further into crisis.
This is behind the renewed expectations that the US Federal Reserve will announce a new round of 'quantitative easing' (QE - printing money) in response to forecasts of the US having a 50-50 chance of entering recession before the end of the year. But QE1 and QE2 have not solved the problems and it remains to be seen whether a new 'stimulus package' will be sufficient to stem the crisis.
Fears about the future of the world economy have been reflected in the price of gold and oil. Gold - not 'paper value' but a store of real value - is always a favourite 'investment' in uncertain times. Its price has jumped to new nominal records well over $1,720 an ounce and could, in some estimates, go as high as $2,500 by the end of the year.
Another 'safe haven' for investors - the Swiss Franc - has reached in the last month record highs against the euro and the dollar. The 'Swissie' has now moved into negative interest rate territory, which means investors paying the banks to hold their assets safe!
On the other hand, the price of oil has considerably declined. This is because of the grave concerns about downturns in growth leading to a fall in demand.
As the CWI has explained on many occasions, the very feeble recovery in most countries has not been accompanied by any sizeable growth in total output. Apart from some notable exceptions, it did not bring jobs for the tens of millions of unemployed, nor stem what seems like a war on the poor - massive cuts in public spending.
Further cutbacks and downturns in the prospects for young people lie behind the outbursts of anger recently seen on the streets of England. Seriously prepared strikes and general strikes are urgently needed in a series of countries now to stem the attacks on pension rights.
Without the trade union leaders giving a clear lead in the struggle against cuts across Europe and in other countries, clashes with police and attacks on property could erupt in the most deprived urban areas.
A programme of jobs and homes for all has to be accompanied by a struggle for the nationalisation, under democratic workers' control and management, of the banks and big monopolies. This can channel all the anger and frustration of youth and workers against the system.
Crisis measures
On 21 July a special meeting of Eurozone finance ministers agreed another bailout for the Greek government. But within days it was clear this would not solve Greece's underlying problems or prevent a default of its national debt. Before the 21 July agreement can even come into force, it has to be ratified by all of the Eurozone governments, mostly through their parliaments which are not in session during August.
Only two weeks after this, under pressure from the Eurozone leaders, especially Merkel and Sarkozy, the European Central Bank (ECB) was forced to announce new measures to try and prevent the stock markets going into a tail-spin after Friday's news from America! Its previous policy of not buying Italian and Spanish bonds on the open market was reversed.
This reduced, at least temporarily, the rates on these countries' borrowings. However, stock markets remain volatile, reflecting investors' doubts over effective EU measures to solve the eurozone sovereign debt crisis.
Other discussions have taken place about expanding the powers to intervene by using the €440 billion in the European Financial Stability Fund but they are hampered by the need for unanimity across the zone.
Italy and Spain's governments alone need to find an extra €840 billion over the coming 18 months - more than the total of bailouts already found for Greece, Ireland and Portugal.
The ECB measure will ease the situation in relation to the debts of Italy and Spain but the strings attached will bring them into head-on confrontation with their populations.
Italy's prime minister, Silvio Berlusconi, has tried to give the impression there is no major problem in Italy. But his country has one of the biggest debts as a percentage of GDP (nearly 120%) and an economy which has failed to grow more than a fraction of 1% for the past two decades.
He has now agreed, with his government, to bring forward the deadline by which budget cuts will balance the state books - from the original 2014 (well after the next general election) to 2013 (still after the next election is due!).
Extra austerity measures, nearly double those already announced, have been put through the cabinet by decree. Already, even in a summer period, opposition is mounting. Berlusconi has said he will not stand next time round, but he desperately needs a government in power that will not allow three major court cases against him to proceed.
Spain's prime minister, José Luis RodrÃguez Zapatero, has also declared he will not stand in November's election, sensing the widespread dissatisfaction with his inability to get Spain's economy back into healthy growth.
He has nevertheless agreed to increase austerity measures as a condition of the new loans. The massive level of youth unemployment in Spain and a feeling of utter neglect by politicians have been behind the mass movement of the 'indignados' - young people disillusioned with political parties and looking for radical, even revolutionary solutions.
Richard Hunter, a broker from Hargreaves Lansdown, said: "The markets are looking for a concrete plan out of Europe and the US in terms of how they are going to deal with their deficits." But because of private ownership and the states' role in defending the national interests of their own capitalists, a clear plan is something that capitalism, by its very nature, can never provide.
Capitalist anarchy
Trying to control an anarchic and blind system, none of the measures they take seems to stem the downward spiral into the worst crisis since the 1930s.
The measures they take to try and rescue their system will mean yet more cuts and austerity, yet more suffering and anguish for the vast majority of the world's population. The accumulating crises - economic and political - of the last few weeks, have only served to underline the chaotic and wasteful way in which capitalism works or fails to work.
Only 58.1% of Americans of working age now have a real job. Tens of millions of people worldwide are on the scrapheap when they could be producing goods and providing services.
On the basis of public ownership and democratic planning, all the human and physical resources of society could be harnessed for the benefit of the vast majority instead of the increasingly rich minority.
The stranglehold of the banks and capitalist politicians over the lives of millions, in fact, billions, has to be broken. Mass movements, including general strikes, will show the power that the working class can wield in society.
Linked with the energy and anger of the youth, new mass workers' parties can be rapidly built. Confidence in the idea of a socialist alternative to capitalism can and must be renewed without delay.
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Showing posts with label Portugal. Show all posts
Showing posts with label Portugal. Show all posts
Wednesday, 17 August 2011
Thursday, 19 May 2011
The euro zone crisis deepens
So as i eluded to earlier in the week with my post on us not being out of the woods of this economic crisis by a long stretch of the imagination i thought i'd follow it up with this excellent article in this week's issue of the socialist
wwhich you can read more brilliant articles like this one at a
www.socialistparty.org.uk
The eurozone faces its deepest crisis since the euro was launched in 1999. Failure to resolve the sharpening Greek debt emergency would have a devastating effect on the European and world economies. A default by Greece, in effect, bankruptcy under which the Greek government would not be able to pay its debts, would trigger a new banking crisis, probably as severe as 2008. At the same time, a Greek default could trigger the breakup of the eurozone, with the emergence of two or more currency areas, if not a complete disintegration.
Greece, moreover, is far from being an isolated case. Ireland, Portugal and Spain face similar problems.
There is no agreement between the eurozone leaders on how to deal with the crisis. Their disarray has been heightened by the Dominique Strauss-Kahn affair, with the head of the International Monetary Fund (IMF) facing charges of sexual assault in New York.
Whichever policy is followed by the eurozone capitalists, the working class faces a prospect of savage austerity. New loans will only be granted to the Greek government on the basis of even more drastic austerity measures. On the other hand, a default and exit from the eurozone would, on a capitalist basis, also lead to a further degradation of living standards.
The Greek bailout implemented last year has not worked. The Greek government was granted €110 billion of loans on condition that it carried out drastic attacks on the working class: welfare spending cuts, wage cuts, pension cuts, and increased taxes. However, it is estimated that Greece will require around €50 billion of new loans in 2012 to cover its borrowing needs. The main reason Greece has not met its economic targets is that the austerity measures have prolonged the economic slump. The Greek economy contracted by -4.4% last year and is expected to contract by -3.5% this year. In reality, the IMF/ECB/eurozone 'rescue' has only increased the indebtedness of Greek capitalism and undermined its ability to pay off its debts.
Privatisation
The eurozone leaders are discussing a further €30 billion loan to Greece, but only on condition that the government rapidly carries out a further €50 billion of privatisation of state industries and utilities. It has even been proposed that these privatisations should actually be supervised by the IMF, which would mean a complete loss of economic sovereignty for Greece.
Capitalist leaders are deeply divided. The European Central Bank, the German government and others favour more loans to Greece, on condition of further austerity measures and privatisation. Leaders like Angela Merkel in Germany fear an electoral backlash against further bailouts. There is fear of the eurozone becoming a so-called 'transfer union' in which the stronger economies are effectively financing the weak economies.
Other sections of the capitalists, particularly in the finance sector, now believe that a default is inevitable. They recognise there is a limit to the austerity that can be imposed on the Greek people without provoking greater social conflict and uprisings. It would be better, in their view, to carry out an orderly default. This would involve the exchange of existing Greek government bonds for new bonds, guaranteed by the IMF/ECB, etc, that modified their terms. This could mean longer periods of repayment and a lower interest rate. But the most contentious issue is whether there should be a reduction in the face value of the bonds (though in the secondary bond market there is already at least a 40% reduction in the value of the bonds).
The main motive of these finance capitalists is to carry out an effective rescue of the banks. Overall, foreign banks have loaned £1.6 trillion to the four heavily indebted eurozone countries, Greece, Ireland, Portugal and Spain. Domestic banks also hold billions of euros of government bonds. A forced default, or a panic-driven rescheduling, could trigger a banking crisis on the scale of 2008. There would be huge losses for the banks, not only on government bonds but also on the various 'derivatives' which are linked to the bonds.
At the moment, the Greek government is clinging to the euro (despite rumours early in May that it was considering withdrawal from the eurozone). It calculates that if it is part of the eurozone then the stronger eurozone governments will be forced to bail out the Greek economy.
However, at a certain point the conditions of such a bailout will become unsustainable. The conditions attached to new loans would make them intolerable, making withdrawal from the eurozone preferable. Then, countries like Greece and most likely Ireland and Portugal (and possibly Spain) would at least have the option of devaluing their new national currencies and boosting exports, as well as encouraging inflation which would reduce the real (inflation-adjusted) value of their debts.
Recent events confirm the analysis of the eurozone that the Socialist Party put forward from the beginning. While the euro could develop for a period on the basis of the growth of the European economy, we predicted that the common, multinational currency would not be able to overcome the national divisions of capitalism. In fact, the euro did not bring a 'convergence' between the stronger economies, like Germany and France, and the weaker, 'peripheral' countries, like Greece, Italy, Portugal and Spain. The low interest rates that were based on the performance of the stronger economies helped fuel property bubbles in the weaker economies. They also allowed their governments to hugely increase public spending on the basis of a temporary boost to tax revenues, fuelled by property booms and financial speculation.
When the global economy was pushed into deep recession after the onset of the US subprime crisis in 2007, the peripheral economies were faced with an unsustainable burden of debt. Deficits were boosted by the downturn, with the eruption of mass unemployment and the collapse of tax revenues.
The euro may or may not survive this crisis. But, sooner or later, the eurozone will be wrecked on the rocks of insurmountable economic problems and the conflict of national interests between the member states.
Horrendous austerity measures have provoked massive resistance from the working class throughout Europe, and especially in the countries facing the most acute debt crisis. Workers are furious that they are being forced to pay for a crisis triggered by the banks and other predatory speculators. The real bailout is the rescue of the banks and big business by the working class.
General strikes
In Greece there have been nine general strikes and seemingly endless protests against cuts. There has been resistance in Ireland, Portugal and Spain. Commentators, however, have noted that there appears to be a lull in the strikes and protest action, a certain 'protest fatigue'. Any such pause, however, will be purely temporary. It arises because the leaders of the workers' organisations, while calling strikes under pressure from below, have no alternative to the policy of bailouts and austerity measures.
Faced with this deep, long-term crisis of capitalism, the working class needs a bold alternative. This should be based on a clear refusal to pay the debts run up by capitalist governments, from which banks and other speculators hugely profited when the going was good. Repudiation of debts, however, is not in itself a solution. On the basis of capitalism, bankruptcy of the state would mean a period of prolonged poverty and suffering for the working class.
Control of the banks and the commanding heights of the economy - the major industrial and commercial companies - must be taken out of the hands of the capitalist class, which is responsible for the present global crisis. The economy should be planned and managed in the interests of working people, controlled by elected representatives of workers, trade unions, consumers, community organisations, and so on. This would be the beginnings of a socialist planned economy.
European institutions, like the eurozone and the EU itself, which are clearly agencies of the capitalist ruling class, should not be opposed from a narrow, nationalist point of view. Europe, as well as the wider world economy, cries out for socialist economic planning. This is the only way that the living standards of workers everywhere can be raised, obscene inequalities progressively eradicated, and the environment protected for future generations.
wwhich you can read more brilliant articles like this one at a
www.socialistparty.org.uk
The eurozone faces its deepest crisis since the euro was launched in 1999. Failure to resolve the sharpening Greek debt emergency would have a devastating effect on the European and world economies. A default by Greece, in effect, bankruptcy under which the Greek government would not be able to pay its debts, would trigger a new banking crisis, probably as severe as 2008. At the same time, a Greek default could trigger the breakup of the eurozone, with the emergence of two or more currency areas, if not a complete disintegration.
Greece, moreover, is far from being an isolated case. Ireland, Portugal and Spain face similar problems.
There is no agreement between the eurozone leaders on how to deal with the crisis. Their disarray has been heightened by the Dominique Strauss-Kahn affair, with the head of the International Monetary Fund (IMF) facing charges of sexual assault in New York.
Whichever policy is followed by the eurozone capitalists, the working class faces a prospect of savage austerity. New loans will only be granted to the Greek government on the basis of even more drastic austerity measures. On the other hand, a default and exit from the eurozone would, on a capitalist basis, also lead to a further degradation of living standards.
The Greek bailout implemented last year has not worked. The Greek government was granted €110 billion of loans on condition that it carried out drastic attacks on the working class: welfare spending cuts, wage cuts, pension cuts, and increased taxes. However, it is estimated that Greece will require around €50 billion of new loans in 2012 to cover its borrowing needs. The main reason Greece has not met its economic targets is that the austerity measures have prolonged the economic slump. The Greek economy contracted by -4.4% last year and is expected to contract by -3.5% this year. In reality, the IMF/ECB/eurozone 'rescue' has only increased the indebtedness of Greek capitalism and undermined its ability to pay off its debts.
Privatisation
The eurozone leaders are discussing a further €30 billion loan to Greece, but only on condition that the government rapidly carries out a further €50 billion of privatisation of state industries and utilities. It has even been proposed that these privatisations should actually be supervised by the IMF, which would mean a complete loss of economic sovereignty for Greece.
Capitalist leaders are deeply divided. The European Central Bank, the German government and others favour more loans to Greece, on condition of further austerity measures and privatisation. Leaders like Angela Merkel in Germany fear an electoral backlash against further bailouts. There is fear of the eurozone becoming a so-called 'transfer union' in which the stronger economies are effectively financing the weak economies.
Other sections of the capitalists, particularly in the finance sector, now believe that a default is inevitable. They recognise there is a limit to the austerity that can be imposed on the Greek people without provoking greater social conflict and uprisings. It would be better, in their view, to carry out an orderly default. This would involve the exchange of existing Greek government bonds for new bonds, guaranteed by the IMF/ECB, etc, that modified their terms. This could mean longer periods of repayment and a lower interest rate. But the most contentious issue is whether there should be a reduction in the face value of the bonds (though in the secondary bond market there is already at least a 40% reduction in the value of the bonds).
The main motive of these finance capitalists is to carry out an effective rescue of the banks. Overall, foreign banks have loaned £1.6 trillion to the four heavily indebted eurozone countries, Greece, Ireland, Portugal and Spain. Domestic banks also hold billions of euros of government bonds. A forced default, or a panic-driven rescheduling, could trigger a banking crisis on the scale of 2008. There would be huge losses for the banks, not only on government bonds but also on the various 'derivatives' which are linked to the bonds.
At the moment, the Greek government is clinging to the euro (despite rumours early in May that it was considering withdrawal from the eurozone). It calculates that if it is part of the eurozone then the stronger eurozone governments will be forced to bail out the Greek economy.
However, at a certain point the conditions of such a bailout will become unsustainable. The conditions attached to new loans would make them intolerable, making withdrawal from the eurozone preferable. Then, countries like Greece and most likely Ireland and Portugal (and possibly Spain) would at least have the option of devaluing their new national currencies and boosting exports, as well as encouraging inflation which would reduce the real (inflation-adjusted) value of their debts.
Recent events confirm the analysis of the eurozone that the Socialist Party put forward from the beginning. While the euro could develop for a period on the basis of the growth of the European economy, we predicted that the common, multinational currency would not be able to overcome the national divisions of capitalism. In fact, the euro did not bring a 'convergence' between the stronger economies, like Germany and France, and the weaker, 'peripheral' countries, like Greece, Italy, Portugal and Spain. The low interest rates that were based on the performance of the stronger economies helped fuel property bubbles in the weaker economies. They also allowed their governments to hugely increase public spending on the basis of a temporary boost to tax revenues, fuelled by property booms and financial speculation.
When the global economy was pushed into deep recession after the onset of the US subprime crisis in 2007, the peripheral economies were faced with an unsustainable burden of debt. Deficits were boosted by the downturn, with the eruption of mass unemployment and the collapse of tax revenues.
The euro may or may not survive this crisis. But, sooner or later, the eurozone will be wrecked on the rocks of insurmountable economic problems and the conflict of national interests between the member states.
Horrendous austerity measures have provoked massive resistance from the working class throughout Europe, and especially in the countries facing the most acute debt crisis. Workers are furious that they are being forced to pay for a crisis triggered by the banks and other predatory speculators. The real bailout is the rescue of the banks and big business by the working class.
General strikes
In Greece there have been nine general strikes and seemingly endless protests against cuts. There has been resistance in Ireland, Portugal and Spain. Commentators, however, have noted that there appears to be a lull in the strikes and protest action, a certain 'protest fatigue'. Any such pause, however, will be purely temporary. It arises because the leaders of the workers' organisations, while calling strikes under pressure from below, have no alternative to the policy of bailouts and austerity measures.
Faced with this deep, long-term crisis of capitalism, the working class needs a bold alternative. This should be based on a clear refusal to pay the debts run up by capitalist governments, from which banks and other speculators hugely profited when the going was good. Repudiation of debts, however, is not in itself a solution. On the basis of capitalism, bankruptcy of the state would mean a period of prolonged poverty and suffering for the working class.
Control of the banks and the commanding heights of the economy - the major industrial and commercial companies - must be taken out of the hands of the capitalist class, which is responsible for the present global crisis. The economy should be planned and managed in the interests of working people, controlled by elected representatives of workers, trade unions, consumers, community organisations, and so on. This would be the beginnings of a socialist planned economy.
European institutions, like the eurozone and the EU itself, which are clearly agencies of the capitalist ruling class, should not be opposed from a narrow, nationalist point of view. Europe, as well as the wider world economy, cries out for socialist economic planning. This is the only way that the living standards of workers everywhere can be raised, obscene inequalities progressively eradicated, and the environment protected for future generations.
Thursday, 7 April 2011
Portugal becomes latest country to ask for a austerity bailout
So as we hear our news tonight we hear Portugal is the latest country to aqquire a financial bailout from the EU. this is the third country now after Greece and Ireland. If this trend continues this really could spell a crisis for the major forces in the EU.
Portugal's caretaker Prime Minister Jose Socrates has said that he has asked the European Union for financial assistance.
Mr Socrates said the country was "at too much risk that it shouldn't be exposed to".
The government has long resisted asking for aid but last week admitted that it had missed its 2010 budget deficit target.
Portugal follows Greece and the Irish Republic in seeking a bail-out.
"I always said asking for foreign aid would be the final way to go but we have reached the moment," Mr Socrates said.
"Above all, it's in the national interest."
European Commission President Jose Manuel Barroso said in a statement that Portugal's request would be processed "in the swiftest possible manner, according to the rules applicable".
He also reaffirmed his "confidence in Portugal's capacity to overcome the present difficulties, with the solidarity of its partners".
Borrowing costs
Mr Socrates did not say how much aid Portugal would ask for. Negotiations will now be underway and the BBC's business editor Robert Peston said rescue loans could amount to as much as 80bn euros ($115bn; £70bn).
Mr Socrates was speaking after Finance Minister Fernando Teixeira dos Santos said it was necessary to resort to financial aid from the EU.
Matthew Price
Europe correspondent, BBC News
--------------------------------------------------------------------------------
First Greece, then Ireland, now Portugal. But unlike the previous two bail-outs, this one does not seem to have provoked panic - either in the corridors of power here, nor on the markets.
The EU's top economic official Olli Rehn called the Portugese decision a "responsible move". The President of the European Commission Jose Manuel Barroso - himself Portugese - said the request would be processed as quickly as possible.
A team could be dispatched to Portugal in the coming days.
EU finance ministers hold a scheduled meeting in Hungary at the end of the week. Portugal will be top of the agenda.
The European Commission and the European Central Bank are both expected to be involved in the bail-out funding. The International Monetary Fund says it stands ready to help as well.
Earlier, the government raised about 1bn euros after tapping the financial markets in order to repay loans, but will have to pay a higher interest rate to lenders.
Portugal's cost of borrowing has risen sharply since the minority Socialist government resigned last month after its proposed tougher austerity measures were defeated in parliament.
Since then several rating agencies have downgraded the country's debt.
An informal meeting of European finance ministers had already been scheduled for Thursday in Budapest. Portugal was not originally on the agenda but is expected to be discussed.
The UK Treasury Minister Mark Hoban will attend. A source at the Treasury said that the bilateral loan the UK offered to the Irish Republic was "very much a special case" and a similar offer is "not on the table" for Portugal.
Jan Randolph, head of sovereign risk at IHS Global Insight, told the BBC that Portugal might organise "some sort of bridging loan" in the short term.
But he added: "The real big loan over several years will require a medium-term plan and I don't think that can be agreed until the new government comes into place."
Elections are likely to take place in a few months' time.
Many things stand out for me in this piece i've found from the BBC. One is the simialrities in language used by this guy. The term "national interest" again reminds me of David cameron's arguement that the cuts in the Uk wre in the national interest and dealing with the deficit is in our national interest. Plus again i feel that any bailout for any country now will result in heavy cuts that again you guessed it fall on the working class. Portugal isnt a very rich country and its working class will unfortunatly have to suffer from these cuts again i am sure. Not if they resist though.
Again i am sure that as in Portugal as in Ireland as in Greece mistakes from teh bankers and the gambling nature of these bankers has caused this crisis. But instead of the bankers paying for their mistakes of which they should the burden is placed on the shoulders of the working class again and again. They want to take back all that we have won over the years and put us back in our box. I do hope the good people of Portugal can organise and form a resistance to these oncoming cuts. They like us face the same struggles and battles ahead in Portugal and we stand by the comrades in taht country to build for an alternative with strikes and demo's on a large mass scale.
Portugal's caretaker Prime Minister Jose Socrates has said that he has asked the European Union for financial assistance.
Mr Socrates said the country was "at too much risk that it shouldn't be exposed to".
The government has long resisted asking for aid but last week admitted that it had missed its 2010 budget deficit target.
Portugal follows Greece and the Irish Republic in seeking a bail-out.
"I always said asking for foreign aid would be the final way to go but we have reached the moment," Mr Socrates said.
"Above all, it's in the national interest."
European Commission President Jose Manuel Barroso said in a statement that Portugal's request would be processed "in the swiftest possible manner, according to the rules applicable".
He also reaffirmed his "confidence in Portugal's capacity to overcome the present difficulties, with the solidarity of its partners".
Borrowing costs
Mr Socrates did not say how much aid Portugal would ask for. Negotiations will now be underway and the BBC's business editor Robert Peston said rescue loans could amount to as much as 80bn euros ($115bn; £70bn).
Mr Socrates was speaking after Finance Minister Fernando Teixeira dos Santos said it was necessary to resort to financial aid from the EU.
Matthew Price
Europe correspondent, BBC News
--------------------------------------------------------------------------------
First Greece, then Ireland, now Portugal. But unlike the previous two bail-outs, this one does not seem to have provoked panic - either in the corridors of power here, nor on the markets.
The EU's top economic official Olli Rehn called the Portugese decision a "responsible move". The President of the European Commission Jose Manuel Barroso - himself Portugese - said the request would be processed as quickly as possible.
A team could be dispatched to Portugal in the coming days.
EU finance ministers hold a scheduled meeting in Hungary at the end of the week. Portugal will be top of the agenda.
The European Commission and the European Central Bank are both expected to be involved in the bail-out funding. The International Monetary Fund says it stands ready to help as well.
Earlier, the government raised about 1bn euros after tapping the financial markets in order to repay loans, but will have to pay a higher interest rate to lenders.
Portugal's cost of borrowing has risen sharply since the minority Socialist government resigned last month after its proposed tougher austerity measures were defeated in parliament.
Since then several rating agencies have downgraded the country's debt.
An informal meeting of European finance ministers had already been scheduled for Thursday in Budapest. Portugal was not originally on the agenda but is expected to be discussed.
The UK Treasury Minister Mark Hoban will attend. A source at the Treasury said that the bilateral loan the UK offered to the Irish Republic was "very much a special case" and a similar offer is "not on the table" for Portugal.
Jan Randolph, head of sovereign risk at IHS Global Insight, told the BBC that Portugal might organise "some sort of bridging loan" in the short term.
But he added: "The real big loan over several years will require a medium-term plan and I don't think that can be agreed until the new government comes into place."
Elections are likely to take place in a few months' time.
Many things stand out for me in this piece i've found from the BBC. One is the simialrities in language used by this guy. The term "national interest" again reminds me of David cameron's arguement that the cuts in the Uk wre in the national interest and dealing with the deficit is in our national interest. Plus again i feel that any bailout for any country now will result in heavy cuts that again you guessed it fall on the working class. Portugal isnt a very rich country and its working class will unfortunatly have to suffer from these cuts again i am sure. Not if they resist though.
Again i am sure that as in Portugal as in Ireland as in Greece mistakes from teh bankers and the gambling nature of these bankers has caused this crisis. But instead of the bankers paying for their mistakes of which they should the burden is placed on the shoulders of the working class again and again. They want to take back all that we have won over the years and put us back in our box. I do hope the good people of Portugal can organise and form a resistance to these oncoming cuts. They like us face the same struggles and battles ahead in Portugal and we stand by the comrades in taht country to build for an alternative with strikes and demo's on a large mass scale.
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