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Homedavos world economic forum 2014Portugal could quit bailout without credit line: Economy Minister

Portugal could quit bailout without credit line: Economy Minister

Portugal could exit its multibillion-euro bailout program without a precautionary credit line, the country's economy minister told CNBC on Thursday.

António Pires de Lima said Portugal's economy was sufficiently recovered that the country could freely choose whether or not to tap a backup credit line when it quits its bailout on May 17.

"I think the two options are open and I think it is good we can have the freedom to choose between the two options until three or four weeks before the end of the program," de Lima told CNBC at the World Economic Forum in Davos, Switzerland.

Ireland — another euro zone member hard-hit by the financial crisis — exited its own international bailout without a backup program at the end of last year, raising the pressure on Portugal to do the same.

However, some analysts doubt the wisdom of Portugal following suit.

(Read more: Portugal: The 'market of the year'?)

"The reality is that Portugal is not Ireland — and even Ireland will struggle to stand on its own two feet," said Nicholas Spiro of Spiro Sovereign Strategy in a research note earlier this month.

"Ireland can just about get away without a safety net, but Portugal almost certainly can't. Yet by deciding against applying for a credit line, Dublin has made things even more politically difficult for Lisbon. There's now even more stigma attached to a post-bailout precautionary program."

(Read more: Youth unemployment EU's 'single biggest crisis': Irish PM)

However, investor sentiment on Portugal has sharply improved, evidenced by rallies in the country's stock and bond markets. Yields on benchmark 10-year bonds remained below 5 percent on Thursday, down from around 7 percent at the peak of the crisis.

De Lima said that market movements reflected the government's efforts to meet the economic targets set by its international creditors and invigorate its economy.

"The economy is recovering, driven by our export sector," he said.

The politician warned however investor euphoria was a "very dangerous state of mind".

—By CNBC's Katy Barnato. Follow her on Twitter: @KatyBarnato


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