Barroso says Portugal would do well to take new aid programme

(LISBON) - European Commission President Jose Manuel Barroso said Monday taking a precautionary credit line would boost confidence in Portugal once it finishes its EU-IMF rescue later this year.

"A precautionary programme would without a generate more confidence and security," Barroso was quoted as saying by Portuguese journalists in Brussels.

"It would be the best option, in principle, but it is still a little early to decide."

As Portugal nears the end of its 78-billion-euro ($106-billion) EU-IMF bailout in May there has been increasing discussion whether it will follow in Ireland's footsteps and forgo any of the EU's new assistance programmes.

The EU's new European Stability Mechanism bailout fund offers two types of precautionary loans.

While they come with some conditionality attached, they open up the possibility of the European Central Bank buying the country's bonds in the secondary market.

That could be very useful support as Portugal returns to bond markets for finance.

Last week, Portugal successfully sold 3.25 billion euros in its first sale of medium-term debt in a year.

The yield on its 10-year bonds is safely under the 7 percent level widely seen as the level when market borrowing is financially unsustainable.