Brussels, 15/02/2012 (Agence Europe) - The international creditors of Portugal have been back in Lisbon since Wednesday 15 February, for a new mission to assess the budgetary and macroeconomic efforts made in exchange for aid of €78 billion, which was made available in May 2011. The troika (European Commission, ECB, IMF) must now look at restructuring public enterprise and reforms underway in the fields of health care, education and justice, reports AFP. The aim is to validate the payment of a new tranche of aid of €14.9 billion.
This third mission started in a reasonably positive atmosphere. The Portuguese authorities managed on Wednesday to allocate €3 billion in Treasury bonds with lower rates and higher demand compared to similar operations in January and early February. But the situation in Portugal raises questions over an adjustment of the Portuguese programme and a restructuring of public debt. An unexpected private conversation between Schäuble and Vitor Gaspar, at the Eurogroup meeting last week, has lent weight to this hypothesis, as the German finance minister indicated that Germany was “disposed to an adjustment” of the programme, once the Greek issue had been resolved.
Economic prospects for Portugal for 2012 are mediocre. According to official Portuguese estimates, national GDP fell by 1.3% in the fourth quarter of 2011 (2.7% taken annually) and the drop is likely to be in the order of 3% in 2012. These figures imply that the country will not be able to return to the markets in 2013. Moody's used these forecasts to downgrade the country's rating on Monday, citing “the poor macroeconomic prospects of the country, which will continue to affect an already fragile market confidence”. “A deeper economic contraction, longer than anticipated”, together with fears of a Greek default, “are likely to extend the period during which Portugal will not be able to access the markets”, said the American rating agency.
On Wednesday, the New York Times ran an in-depth article tackling the issue of a possible restructuring of the Portuguese debt, which could reach 118% of GDP in 2013. Vitor Gaspar said once again that this hypothesis was “out of the question”, several sources in the Portuguese media report. He said that once all the reforms have been put in place, growth will return in 2014 and help to reduce the indebtedness. (SP/transl.fl)