Portuguese Prime Minister Jose Socrates, left, on Tuesday makes a statement next to Finance Minister Fernando Teixeira dos SantosHO/Reuters
Portugal has reached agreement with the European Union and IMF on a three-year, €78-billion ($116-billion U.S.) bailout loan, caretaker Prime Minister Jose Socrates said on Tuesday.
Mr. Socrates' government collapsed last month, sparking a sharp rise in borrowing costs which forced Lisbon into becoming the third euro zone country to seek a bailout after Greece and Ireland.
Mr. Socrates, who now faces a snap parliamentary election on June 5, hailed the package as a victory, saying it included more lenient terms than those imposed on Greece and Ireland.
The deal gave Portugal more time to meet budget goals which it had previously agreed to.
"The government has obtained a good deal. This is a deal that defends Portugal," Mr. Socrates said.
He provided few details of what terms the bailout included, saying only "there are no financial assistance programs that are not demanding."
Filipe Garcia, head of Informacao de Mercados Financeiros consultants in Porto, said: "He showed us the bright side of the moon, it is the dark side that remains to be seen, and that includes the interest rate".
Mr. Socrates said Portugal would now need to cut its budget deficit to 5.9 per cent of gross domestic product this year, compared with the government's previous goal of 4.6 per cent. The deficit will have to be cut to 4.5 per cent in 2012 and 3 per cent in 2013.
"Some of the parameters look a little softer than expectations such as the higher deficit target and longer time line," said Vitaly Serebryakov, currency strategist at Wells Fargo in New York.
Officials from the European Commission, the International Monetary Fund and European Central Bank have been in Lisbon for almost a month to hammer out the agreement with Portugal.
Mr. Socrates said the agreement still has to be presented to opposition parties.
Opposition Social Democrat leader Pedro Passos Coelho said earlier he was ready to meet with the lenders.
A new government after the June election will have to enact the terms of the bailout. Mr. Socrates said the loan agreement would not require any changes to the constitution.
The deal is expected to be approved at a meeting of euro zone finance ministers in mid-May, in time for the EU rescue fund to raise money for Portugal by June 15, when the country needs to meet a bond redemption of €4.9-billion.