Portugal

What makes Portugal different

There were several stand-outs in yesterday’s markets and Portugal was one of them, with yields rising dramatically as other peripheral eurozone markets saw theirs fall in the wake of the ECB 3Y LTRO. This was despite the Troika’s relatively up-beat assessment of Portugal’s progress on its program of reforms and austerity, in contrast to the frustration often voiced with regards to Greece. But as with most, Portugal is being asked to implement austerity and reforms against an economy which will contract this year, by more than 3% according to the latest forecasts from the troika. Read more

01/03/2012 @ 10:39 GMT

The price of austerity

On the face of it, the vote to pass the latest austerity measures in Greece passed comfortably, 199 votes in favour with 74 against. But the political and social price has been high. Several cabinet ministers have resigned and violent protests have spread across the country. But as always, it’s a question of implementation of the measures which run to over 50 pages in the memorandum of understanding. We’re not home and dry yet however, with EU Finance Ministers set to meet on Wednesday to give final approval, together with the finalisation of the private sector involvement deal. Read more

13/02/2012 @ 08:21 GMT

Portugal may get some pain-relief

Amidst the perma-pain of fiscal austerity, finally some reward for Portugal. In a meeting yesterday between the German and Portuguese Finance Ministers, the former suggested that there may be room to ease the terms of Portugal’s EUR 78bln bailout package, but only after the Greek situation has been clarified. Schaeuble remarked that Portugal had made good progress in implementing the various conditions contained in the bailout. The Portuguese 10yr yield is down another 20bp today at 13.15% - down more than 500bp in a little over a week. Read more

10/02/2012 @ 09:59 GMT

The problem with Portugal

In extremely difficult circumstances, the government of Prime Minister Pedro Passos Coelho deserves fulsome praise for the gusto it has displayed in attempting to rectify the gaping hole in Portugal’s national balance sheet. With an electoral mandate based on austerity, he has implemented measures that are expected to reduce the budget deficit to around 4.5% of GDP this year, after it reached almost 10% back in 2010. Having received bailout assistance of EUR 78bln last year from the troika, Portugal is essentially fully funded until late next year. Read more

07/02/2012 @ 11:42 GMT

A big agenda for eurozone Finance Ministers

Today’s meeting of eurozone finance ministers in Brussels has a very full agenda to consider. There is the latest draft of the fiscal compact to discuss (see below), a review of the progress made in the Greek debt talks, and a conversation on a draft for the European Stability Mechanism (ESM). The latter apparently includes collective action clauses, although any debt write-offs will need to comply with IMF standards. Read more

23/01/2012 @ 08:21 GMT

Portugal’s slow-motion train crash

Last Friday’s announcement by S&P that it was lowering Portugal’s credit rating to below investment grade was another nail in the coffin of the embattled nation. For those that had not already done so, the downgrade forced those money managers who still had exposure to Portugal to offload. The ten-year bond yield rose to 14.40% yesterday, 1250bp above comparable Bunds. Although the Portuguese Prime Minister has been praised by other EU leaders for his austerity measures, it is clearly weighing heavily on the economy. Read more

20/01/2012 @ 12:20 GMT

Euro succumbs to familiar themes

The relative calm and optimism that characterised yesterday’s trading session has now dissipated with both the euro and Swiss franc leading the charge lower in currency markets during the course of Wednesday. We’re back into familiar territory, with Spanish bonds falling on the back of newspaper speculation (Expansion) that Spain is seeking EU/IMF help, although the government have denied such claims. The new government has been quick to use its majority to outline austerity plans and appoint ministers in an attempt to convey they mean business. Read more

04/01/2012 @ 13:46 GMT

Something to smile about in Portugal.

An underlying assumption made by many investors and traders is that once Greece defaults, Portugal will be the next in line. For those who hold to this view, it is a relatively easy case to make – Portugal is a zero-growth economy with a government debt-to-GDP ratio expected to reach 100% by the end of the year. However, the government of Prime Minister Pedro Passos Coelho has implemented a stringent fiscal austerity program in order to comply with the conditions of the EUR 78bln bailout provided by the EU and the IMF. Read more

05/10/2011 @ 09:53 GMT

FOREX: The strain spreads within the eurozone

The euro has been the worst performer of the majors so far this week and also during the first few trading hours of the European session this morning. The main reason is the downgrade of Portugal to below investment grade by Moody’s, which has seen bond yields soar by over 1% towards the short end of the curve. Italy is not escaping, with yields there having increased by around 10bp on the day. Read more

06/07/2011 @ 09:10 GMT

The euro’s signs of stress

The single currency is staging a modest fight-back this morning, which should be viewed in the wider context of a modest return in risk appetite and a tightening of eurozone bond spreads. This is the first time in the past six sessions that we have seen a broad-based tightening move in peripheral spreads. However, what’s been more notable over this period is that Spain and Italy were involved in the widening move, whereas for most of the year to date, both have managed to de-couple from the moves being seen in Ireland, Portugal and Greece. Read more

24/05/2011 @ 10:44 GMT

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