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Portugal PM: Protective line of credit not needed as bailout oversight set to end

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LISBON, Portugal - Portugal will not seek a protective line of credit after its government fulfils requirements imposed by foreign bailout creditors as part of a 78 billion euro ($107 billion) rescue package, its prime minister said Sunday.

Pedro Passos Coelho's government is due to regain financial sovereignty over the economy on May 17, after three years of being told what to do by the International Monetary Fund, European Commission and European Central Bank under a financial rescue.

"It is the right choice at the right time," Passos Coelho said, adding that the Cabinet had taken the decision "after careful consideration and reviewing all the pros and cons." A protective line of credit would have acted as a safety net for the economy, but would have come with strings attached.

The 2011 rescue prevented national bankruptcy, but Portugal had to accept steep tax increases, an end to long-standing labour entitlements and deep cuts in pay, pensions and welfare rights.

Passos Coelho said the government had decided it will not ask for extra financial help because it could now seek loans in international markets "without constraints."

European Commission Vice-President Siim Kallas in Brussels said Portugal had made "great efforts and sacrifices" which had paid off, as "the external current account has moved from a large deficit into surplus, the budget deficit has been more than halved, and access to sovereign debt markets has improved markedly."

Christine Lagarde, IMF managing director, also welcomed the decision, saying Portuguese authorities had established a strong track record in dealing with long-standing structural problems.

"This bodes well as Portugal exits its EU/IMF-supported program," she said.

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