The European Union decided that a bailout of Portugal could not wait until the Portuguese had conducted their elections. Portugal was effectively made an offer that it could not refuse: either accept the bailout or the European Central Bank would refuse to buy Portuguese bonds, thus driving interest rates skyhigh and triggering a default.  Prime Minister José Sócrates had no choice bu to assent to the €78 billion aid package.

By doing so he made the bailouts an election issue. The government argues that it had secured better terms from the IMF and the European Union than those imposed on Greece and Ireland (the Irish have already signaled that they will now seek a reduction in interest rates based on the Portuguese deal). Portugal will have a longer period to cut its debt ratio; cuts in public service jobs will be effected by a freeze on hiring replacements for retiring workers.

The government will raise sales taxes in a bid both to raise income and dampen domestic consumption while reducing severance payments and the duration of unemployment benefits. This is intended to cut labor costs and make Portugal more competitive, as the main problem is a deficit in the balance of payments. Portugal imports far more than it exports. Portugal is also required to sell off government assets such as its TAP airline.

The government is claiming it got a good deal, and succeeded in defending the distressed social groups that most needed help. It said that due to a series of preliminary measures that were taken in time, it had reduced the severity of the terms.

Electoral rivals, while agreeing to support the package under duress, preferred to emphasize the bitter medicine: Portugal's economy will contract driving the unemployment rate higher. They did not agree that the government deserved thanks for a better deal and claimed that it was government ineptness that brought about the need for a bailout in the first place.

As Portugal is now the third EU country, after Greece and Ireland, to require a bailout, the realization has sunk in that a bailout only buys time. Portugal now has a 2 or 3 years hiatus during which credit concerns are assured. After that the country receiving a bailout is again on its own and would-be creditors must be confident that the country can pay its bills. To do so the country must exhibit growth rather than contraction. All this is easier said than done and therefore success or failure for this week's prophylactic measure will become apparent only two years down the road.