Portugal and Ireland get loan extension

Eurozone finance ministers have favoured giving bailed-out Ireland and Portugal an extra seven years to repay the loans they received to save them from collapse, Jeroen Dijsselbloem, the 17-member Eurogroup head, has said.

Ministers "want to make a definitive and positive" decision on the extension, designed to ease the pressure on both countries, when they meet their European Union colleagues later in the day, Dijsselbloem said on Friday.

The decision to extend the loan repayment schedules for Ireland and Portugal proved uncontroversial and was expected to be backed by the finance ministers of all 27 EU ministers, who were meeting on Friday in the Ireland's capital, Dublin.

The loan repayment extensions are intended to ease financial pressure on the countries, helping them resume long-term bond sales when their bailout loans run dry. Ireland's loans run out later this year and Portugal's in 2014.

The situation in Portugal was complicated last week when the country's constitutional court struck down parts of the government's austerity programme that was agreed to in return for an international 78 billion euros bailout from EU and IMF.

Ireland received a 67.5 billion euros loan package in 2010 after its banking sector collapsed in the wake of the 2008-2009 global financial crisis.

In their attempts to make progress to stabilise the economy of the 17 nations sharing the single euro currency, the ministers, also approved a 10 billion euro rescue loan package to stop Cyprus from sliding into bankruptcy.

But the amount Cyprus will have to pay towards a bailout has ballooned. Instead of the $9bn Cyprus was originally asked to find - it must now come up with $17bn.

They have also agreed to create a single supervising body to watch over eurozone banks. That task, they said, was urgent given the situation in Cyprus.

"(The) banking union will reinforce financial stability by assuring more uniform and high quality arrangements for supervision and resolution of banks. It will further enforce financial stability by diluting the link between banks and their national sovereigns," Olli Rehn, EU Commissioner for monetary affairs, said.

Dijsselbloem noted that the Portuguese government was "addressing this challenge", and said the troika of EU, IMF and European Central Bank lenders was expected to approve the adjustments.

Vitor Gaspar, the Portuguese finance minister, is trying to identify new cuts to plug a 1.3-billion-euro gap.

The Portuguese government said on Thursday it would provide guarantees to EU partners that it would meet the deficit cutting targets.

Extending the loan repayment period would in turn provide a big boost for Lisbon and help ensure the sustainability of Portugal's public finances.

In particular, it would reduce the amount of money that Portugal needs to borrow in the future, and therefore make it easier for the country to fund itself exclusively on sovereign bond markets when the rescue programme ends in June 2014.