Brussels, 23/04/2014 (Agence Europe) - Portugalwill announce its decision on how exactly to exit its aid programme after the troika's final mission (the European Commission, the European Central Bank and the International Monetary Fund) and “before 5 May” said the country's prime minister, Pedro Passos Coelho, on Wednesday 23 April.
Portugal will therefore announce the decision before the next meeting of eurozone finance ministers, and will explain whether it will be requesting precautionary aid from the eurozone or going it alone. At a conference organised by the newspaper Diario Economico, Passos Coelho said they would be talking about exiting the programme when the final troika mission report is on the table.
Portugal will exit the May 2011 €78 billion international aid programme on 17 May, although payment of the final batch of aid will take not place until the end of June. The Portuguese prime minister has hinted that the position of countries like Germany, which wants it to leave without a safety net, will play a part in Portugal's decision. He said that Germany would have to submit any precautionary aid programme to its parliament for approval, so that is naturally problematic, but there is no objection from Germany as a matter of principle. Chancellor Angela Merkel has publicly said that she would back Portugal's decision before the German parliament, whatever the country decides, added Passos Coelho.
Several options are on the table: a straight return to the money-markets unaided or a more gradual approach using a preventative credit line from the European Stability Mechanism (ESM). The Portuguese president, Anibal Cavaco Silva, who is in the same centre-right party as the prime minister, has called for a preventative credit line, echoing views expressed by the European Commission.
The troika heads of mission began their final assessment of the Portuguese austerity programme in Lisbon on Tuesday 22 April. If they give the nod, the payment of the final batch of aid, €2.6 billion, will take place, probably in June. On Thursday 24 April, the European Commission will publish its monitoring report on the most recent troika mission. Portugal announced new budget savings on Tuesday 15 April totalling €1.4 billion, with a view to reducing its public deficit to 2.5% of GDP in 2015 (see EUROPE 11062).
First regular long-term Portuguese bonds since 2011. Portugal raised €750 million in ten-year bonds at sharply reduced interest rates on Wednesday 23 April, its first long-term bond issuance since the bailout in 2011. The deal was characterised by very strong demand from investors and was a key test of the markets ahead of the exit on 17 May from the three-year bailout organised by the eurozone and the IMF. The interest rate was 3.57%, compared with the 5.112% for the ten-year bond issuance in February in the form of a syndicated loan, explains the Portuguese public debt management institute. Felipe Silva, bond strategist at Banco Carregosa, said Portugal had managed to issue debt at historically low levels - such low levels have not been since at least 2006. He said the most surprising thing was that the yield was lower even than the 3.6% seen on the secondary market of already issued bonds. The borrowing costs for Portugal and other vulnerable eurozone economies have slumped in recent months. (LC)