Portugal reached a â‚¬78 billion bail-out deal with the EU and the International Monetary Fund late last night.
Portugal's caretaker prime minister, Jose Socrates, has a agreed the three year deal worth Â£69 billion with the requirement that the country's deficit be slashed from 9.1% of gross domestic product to 5.9% this year, which has been eased from the initial requirement of 4.6%. The deficit must then be cut further to 4.5% of GDP in 2012 and 3% in 2013.
This though will need cross party support as, whichever party wins the snap general election on June 5th will be left to implement it. Polls at the moment indicate that no party stands to gain an absolute majority.
The pressure is added to by the need for Portugal to find â‚¬4.9 billion so it can redeem its bonds on June 15th.
This makes Portugal the third Eurozone country to receive a bail-out after Greece and Portugal.
The caretaker prime minister said in a televised broadcast that Portugal had 'got a good deal' and that 'we will beat this crisis'.
According to the Associated Press a government official has said that the deal includes aid to Portugal's struggling banks.
The interest rate for the loan gas not yet been set, this is expected to happen on 16th May at a meeting of EU finance ministers.
Many people have predicted that this bail=out was inevitable and that Spain would almost certainly be the next domino to fall. But EU and Spanish ministers believe that Spain is the 'line in the sand' that will not be crossed. Fears that Spain would be next were eased in April after the Spanish government set a deadline in September for their banks to meet new capital requirement levels and they successfully sold â‚¬4.13 billion of 3 year bonds.