German chancellor Angela Merkel has again cast doubt on any significant reduction in the lending rate on euro zone bailout loans to Ireland.
Ms Merkel also called on Portugal to go further with economic reform.
Speaking in Berlin after talks with the Portuguese prime minister Jose Socrates, Ms Merkel poured cold water on the incoming Irish government's hopes of significantly renegotiating the terms of the €85 billion EU-IMF bailout it received in December.
"We cannot artificially reduce interest rates. Ireland and Greece have taken aid," she said, noting that the Irish package was only a few months old.
"Today, I cannot say if we will have to change the package."
If Ireland said it had problems with the interest rates, she said would consider the issue, but there were benchmarks. Dublin could not expect to pay less for rescue loans than Portugal paid to refinance itself in the market, Ms Merkel said.
Portugal is widely regarded as the euro state most likely to need emergency EU/IMF assistance next, following in the footsteps of Greece and Ireland, because it faces market borrowing costs of more than 7 per cent seen as unsustainable.
Ms Merkel said Lisbon had taken "courageous steps" to reduce its deficit and introduced many structural reforms, which now depended on implementation.
"Our government welcomes the efforts the Portuguese government has made. They must go further," she said.
Mr Socrates said it was up to the euro zone as a whole to come up with a convincing response to the sovereign debt crisis in the coming weeks.
Speaking three weeks before a key EU summit on closer economic policy coordination, Mr Socrates swore that Portugal did not need external aid, and Ms Merkel said she had not pressed him to seek assistance.
But a successful €1 billion Portuguese treasury bill auction today, with yields stable and demand solid, did not dispel market concerns that it will need a bailout soon.
Those expectations are partly due to doubts about Germany's willingness to support expanding or reconfiguring the bloc's rescue fund sufficiently to calm investors, following a regional election drubbing for Ms Merkel and growing parliamentary pressure.
On Monday, Portugal's finance minister said Europe must take tougher action within weeks to protect peripheral economies against market attacks, or else austerity efforts to overcome the weaknesses of Portugal's economy would count for nothing.
In other developments, European Parliament lawmakers are set to demand a ban on some types of trading in debt insurance from 2012 to curb speculation blamed for exacerbating the euro zone debt crisis, sources involved in the talks said.
Parliamentarians are likely to propose next Monday a ban on so-called naked trading of credit fault swaps, raising pressure on EU governments to follow suit when ministers meet this month.
"We want to specifically target the speculators," said one source of the preparations for a new EU law that would curb short-selling of such derivatives by people who do not own the underlying government debt being insured," said Ms Merkel.
She said Germany would also press at that meeting for a tax on all financial transactions, starting at euro zone level. Berlin and Paris strongly support such a levy, known as the Tobin Tax, but Britain is sceptical unless it is applied globally, and the US is opposed to the idea.
Reuters