The bailout requested by the Portuguese government should not have a direct impact on Malta’s finances, European Commission sources have told The Times Business.

Sources said the bailout, expected to amount to between €70 billion and €80 billion, will be financed through the temporary mechanisms already put in place by the EU and there will be no need of other direct contributions from individual member states.

Malta has already guaranteed €400 million through its share in the EU’s €750 billion European Financial Stability Mechanism (EFSM) being used to raise funds on the international markets.

“EU member states will not need to contribute further for the time being. The only risk they have in these types of transactions materialises only in the eventuality of defaults in loan repayments by the bailed-out countries. However, this possibility is very remote,” the sources said.

In May 2010, following the near collapse of the Greek economy, the eurozone’s first casualty, Malta had to lend Greece €27 million out of its own pocket as part of a bilateral €110 billion rescue package agreed by the EU, the IMF and the Greek authorities. Malta had to borrow this money in order to make its contribution, although at the end of the three-year deal, the transaction should leave a positive balance on Malta’s public coffers as the island borrows at a favourable rate next to Greece.

Following the Greek bailout, the EU, together with the International Monetary Fund and its member states agreed on a more permanent €750 billion rescue facility put in place in order to be used once other EU member states find themselves in difficulty.

This facility consists of guarantees by the 27 EU member states and by the Commission so that it could act as collateral to raise credit on the international markets once activated.

The Maltese Parliament had passed legislation last June in order to make available €398 million in guarantees as part of its commitment to this fund.

This system was put into practice later in the case of a bailout for Ireland. Meanwhile, the International Monetary Fund yesterday said that the eurozone’s bailed out countries need an urgent discount on their EU loans to bolster market confidence that they will be able to pay back their debts.

In its latest World Economic Outlook, the Washington-based fund says that the EU’s rescue funds should also be given more “flexibility” to intervene in financial markets.

EU leaders agreed in March that the funds should be able to buy bonds direct from issuers in primary markets, but have effectively left it up to the European Central Bank to continue its emergency bond purchases in the secondary markets.

“In the euro area, despite significant progress, markets remain apprehensive about the prospects of countries under market pressure,” the report says. “For them what is needed at the euro area level is sufficient, low-cost and flexible funding to support strong fiscal adjustment, bank restructuring and reforms to promote competitiveness and growth.”