Lisbon to inject €6.6bn into largest banks Portugal is to inject state capital totalling €6.6bn into three of the country's largest lenders, making them among the "most capitalised banks in Europe," the finance ministry said on Monday. The announcement came as Vítor Gaspar, finance minister, said Portugal had complied with all the conditions set by international lenders during the first year of its €78bn bailout programme, clearing the way for payment of the next €4.1bn instalment of rescue funds. Speaking after the fourth quarterly review of the adjustment programme by the European Commission, International Monetary Fund and European Central Bank, Mr Gaspar said Lisbon had met "every quantitative and objective criteria" set by the so-called troika. The "structural transformation" under way in the economy was proof the adjustment programme of deficit-reduction and economic reform was the right path for Portugal, he said. Any measures to stimulate domestic demand would only worsen the country's problems, Mr Gaspar added. Growth had to come instead from making Portugal more competitive internationally. The European Commission, IMF and ECB said in a statement that Portugal was implementing reforms "broadly as planned," noting that its external adjustment was "proceeding faster than expected." But the troika warned that "rising unemployment has emerged as a pressing concern" which required "decisive policy action." Lisbon forecasts the jobless rate will reach a record 15.5 per cent this year, rising to 16 per cent in 2013. "Further action to improve the functioning of the labour market is urgent," the troika said. Mr Gaspar said the funds to be injected in Banco Comercial Português, Banco BPI and state-owned Caixa Geral de Depósitos would ensure they met the requirements for core tier one capital ratios, a key test of financial strength, set by the European Banking Authority. In return, the banks would support economic growth through corporate lending, including a specific commitment by BCP and BPI, both listed, to invest a minimum of €30m each a year in the capital of small and medium-sized companies. About €5bn of the funds to be injected into the banks will come from a €12bn Bank Solvency Support Facility created within Portugal's €78bn bailout package. EBA stress tests in December found Portuguese lenders needed to raise just under €6.95bn to attain the minimum 9 per cent requirement for core tier one ratios by the end of this month. BCP is to draw €3bn in state funds and raise a further €500m through a rights issue. BPI will draw €1.3bn from the state and raise another €200m from a rights issue. The state will inject €1.65bn directly into CGD. State capital is expected to be injected into the banks in the form of so-called high-trigger contingent convertible bonds, or "cocos," which convert into equity if a trigger such as a bank's core capital ratio breaches a predefined floor. Mr Gaspar said the state was also ready to support other banks. However, Banco Espírito Santo, Portugal's largest listed lender by market value, has opted not draw on state funds, instead raising €1.01bn in a recent rights issue. Under the terms of Portugal's bailout agreement, conditions for accepting state capital, include "specific management rules, a restructuring process and restrictions in line with European Union competition requirements." Mr Gaspar said Portugal was on track to lower its budget deficit to 4.5 per cent of gross domestic product in 2012 and 3 per cent in 2013. The economy was expected to contract by 3 per cent this year, but would expand by an estimated 0.2 per cent in 2013, he said. The government had previously forecast growth of 0.6 per cent next year. Measures to help create jobs for young people would be introduced this week to help combat a continuing rise in unemployment. The minister said Portugal was working towards returning to the markets to finance its debt by September 2013, as envisaged in the bailout programme. But he added that the European Commission and the IMF had made firm commitments to continue supporting Portugal if "circumstances beyond our control" made this impossible.