Portuguese Banks More Stable Than Spain's: Finance Chief
Recent stress tests have shown that Portuguese banks are more resilient and well-capitalized than their counterparts in Spain, which were more severely affected by the housing bubble, Portuguese Finance Minister Fernando Teixeira Dos Santos told CNBC Wednesday.
Still, Dos Santos didn't discount the possibility of the country mimicking Spain's moves to consolidate the sector down the line.
"I would not be surprised if continuing this sovereign debt crisis...that the shortrun liquidity mechanisms in money markets could be affected," he said.
On Tuesday, US Treasury Secretary Timothy Geithner urged the Euro Zone to conduct stress tests to resolve mark-to-market on its sovereign debt, saying similar tests in the United States calmed market panic following the financial crisis.
Contagion fears over the European region's lingering debt crisis have caused the euro to slide against the US dollar and have weighed on the global markets.
Dos Santos said the European Union will only succeed in calming global market fears by working together on initiatives that address the financial sector and the economy, as well as by making institutional changes.
"We need, really, to reinforce our mechanisms of the governance of the euro to coordinate better our policies," he said in a live interview. "We are working hardly on that [and] we are making some progress, but it's crucial we succeed."
Earlier this month, Portugal approved austerity measures to cut the country's deficit to 7.3 percent of GDP in 2010, and to 4.6 percent in 2011. The measures include 5 percent pay cuts for senior public sector staff and politicians, and increases of VAT sales tax, income tax and profits tax ranging from one to 2.5 percent.
Last year, the country's debt to GDP ratio was 9.4 percent.
—Reuters contributed to this report