(Reuters) - Portugal's main banks have threatened to stop buying government debt, urging the caretaker cabinet to seek a short-term loan to tide it over a pre-election limbo that prompted another credit rating downgrade on Tuesday.
Bankers said the country urgently needs a bridge loan of up to 15 billion euros (12 billion pounds) to secure financing until a June 5 snap general election.
The chief executive of Portugal's second-largest bank, Ricardo Espirito Santo Salgado, told TVI television banks could not continue lending to the state under current conditions.
"It is urgent to request it (a loan), it is serious if it is not done because it is necessary to neutralise the effect of the rapid rise in interest rates, to calm markets and calm down the Portuguese who are facing elections," the CEO said late Tuesday.
"We are in a situation in which banks are being damaged; naturally they cannot give more credit to public companies and the state under current conditions," he said.
"Due to the worsening of (credit) ratings, banks have to review their situation."
Earlier, financial sources told Reuters the heads of the country's leading banks met Bank of Portugal Governor Carlos Costa on Monday to convey their message.
A bond-buying strike by Portugal's major domestic buyers could shut it out of financing from the markets, pushing it to seek a bailout like Greece and Ireland.
Reuters
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