Portugal debts: UK 'very unlikely' to suffer any loss

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The UK is "very unlikely" to suffer any financial loss as a result of moves to bail out the Portuguese economy, George Osborne has said.

The chancellor acknowledged the UK would have to contribute to EU and IMF rescue funds should Portugal request external help to pay its debts.

But he said Portugal must default for the UK to be financially affected, a scenario which was "extreme".

He was speaking after discussing the crisis with his EU counterparts.

Friday's meeting of EU finance ministers in Hungary was dominated by the debt crisis in Portugal and the terms of a possible bailout of its economy and possible conditions attached to it.

Although the country's caretaker government has yet to make a formal request, it is believed a rescue package of up to 80bn euros (£70bn) may be needed and could be finalised by the middle of May.

Eurosceptic MPs have warned that the UK may have to underwrite £4bn of any loan given, under existing EU arrangements.

Financial terms

Mr Osborne stressed that the UK would not be giving any bilateral aid to Portugal as it did to Ireland.

"We are not writing a special UK loan for Portugal," he told the BBC.

"There will be, providing the parties in Portugal can agree, an IMF, EU and eurozone bailout. Britain is a member of the IMF and a member of the EU and will be involved that way but only if Portugal fails to pay its debts. That is an extreme and very unlikely situation."

Conservative MP Bill Cash has said the group of countries using the euro "should look after itself without any British contribution whatsoever" and that sufficient funds existed within a eurozone-supported fund to which the UK does not contribute.

While the UK's "implied" contribution to any Portuguese bailout would be about £4.2bn, on the basis of its existing financial commitments to emergency funds operated by EU and the International Monetary Fund, BBC business editor Robert Peston said this liability was "pretty indirect".

"There would have to be a cascade of accidents before the British taxpayer incurred any direct loss from Portugal's woes," he said.

'Eurozone crisis'

The UK has ruled out providing any assistance on a bilateral basis as it did with Ireland earlier this year.

The Conservatives and Labour have been at odds over the UK's decision to sign up to an EU-wide bailout fund last May in the period between the inconclusive general election result and the formation of the coalition government.

Shadow chancellor Ed Balls says George Osborne "agreed" to his predecessor Alistair Darling's decision to approve the move - a fact the Tories dispute - and this fund could now be used to contribute to the bailout.

"It is essential that Portugal gets the right kind of help," he told the BBC. But he added: "I have to say I think this is a crisis of the eurozone and the clear bulk of the financing should come from the eurozone countries as well."