Portugal has reached an agreement with international lenders for an economic bailout totaling 78 billion euro ($115 billion) under more lenient terms than originally envisioned.

The "troika" of the European Central Bank, European Union and International Monetary Fund agreed to lend Portugal the money while allowing the indebted nation to cut its budget deficit at a slower rate.

Lisbon will reduce its deficit to 5.9 percent this year as opposed to the more severe 4.6 percent originally called for by international lenders.

"The government has reached a good agreement that defends Portugal," caretaker Prime Minister Jose Socrates said.

Socrates went on to say that "international institutions have recognized that the Portuguese situation is a far cry from those in other countries."

Previously, Eurozone members Greece and Ireland have turned to the European Union and international lenders to bailout their highly indebted economies.

Parliamentary approval pending

Although international lenders and the Portuguese government have reached an agreement, several terms of the deal still have to be approved by the Portuguese parliament. This will occur after snap elections in June.

The bailout has to be in place before June 15 when Lisbon will have to pay back 5 billion euro ($7 billion) in debt.

Prime Minister Socrates was forced to resign his post when the Portuguese parliament failed to approve austerity measures last March. He is currently serving as the head of a caretaker government until the elections.

As a consequence of the country's failure to agree austerity measures, Portugal's borrowing costs rose dramatically, forcing Lisbon to ask for a bailout.

The opposition subsequently promised to work with Socrates. Opposition Social Democrat leader Pedro Passos Coelho said he is ready to meet with lenders to discuss the deal.

The EU said opposition support is critical to Portuguese economic reform and the future success of the country's economy.

"We have said from the beginning that it is important that any program should have broad cross-party support and will continue our engagement with the opposition parties to establish this as the case," European Commission spokesman Amadeu Altafaj said in a statement.

Expensive bonds

Lisbon managed to raise over 1 billion euro ($ 1.48 billion) during a treasury bond auction on Wednesday. However, the rate on the bonds rose from 4.05 percent to 4.65 percent, demonstrating investors' lack of confidence in the Portuguese economy.

Portugal's public debt totals nearly 160.4 billion euro ($237 billion) or 93 percent of its gross domestic product (GDP).

Author: Spencer Kimball (Reuters, AFP)
Editor: Michael Lawton