The finance minister of debt-troubled Portugal is in Beijing, China to try to convince Chinese government authorities to purchase Portuguese government bonds.
Fernando Teixeira dos Santos, who has made a similar journey to Brazil recently, is seeking to resolve Portugal’s financial problems without having to resort to a bailout from the European Union (EU).
Dos Santos is scheduled to meet with the Chinese finance minister Xie Xuren and also with the governor of the Bank of China, Zhou Xiaochuan, according to reports in the Portuguese press reported.
Last month on a trip to Portugal, China’s president Hu Jintao stated his country’s interest in buying Portuguese sovereign debt.
China is already a prominent buyer of European government bonds. According to China’s central bank, China holds about $2.65-trillion in foreign reserves (as of September), making it the world’s largest holder.
However, many observers believe Portugal will follow on the heels of Greece and Ireland in seeking an EU-led rescue, given that, among other woes, Portugal has to refinance or repay 20-billion euros of debt by the middle of next year.
Nonetheless, Prime Minister Jose Socrates has insisted his country can fix its fiscal problems without financial aid from the EU. The country has passed an austerity budget for next year which includes a slew of tax increases and wage cuts for public workers.
We don't have any problem that requires us to ask the International Monetary Fund for help, Socrates told the Portuguese newspaper Diario de Noticias.
Our problem is a problem regarding our deficit.
Socrates seeks to reduce the nation’s budget deficit to 4.6 percent of GDP next year from 7.3 percent this year. Unemployment, currently at 10.9 percent, is likely to rise.
The EU estimates that the Portuguese will contract by 1 percent next year after growing 1.3 percent this year.
Socrates added that “the markets will slowly realize that Portugal is doing what needs to be done to consolidate its government budget in order to give confidence back to the international markets.