(economicsnewspaper) Portugal increasingly close to bankruptcy
Less than 24 hours after the resignation of Portuguese Prime Minister Jose Socrates, the sanction of the market and rating agencies fell, threatening the country with a break of short-term funding, felt, Friday, analysts said. Agencies Fitch and Standard and Poor’s (SP) have deteriorated on Thursday, two notches the debt rating Portuguese direct consequence of the rejection by parliament of the new austerity plan and the collapse of the minority Socialist government. “Fitch does not believe that Portugal can maintain market access at favorable this year,” the agency said in a statement, saying that the probability of external financial support “short term” had “greatly increased” .
The response to these decisions was immediate markets, where rates Portuguese decade reached Friday in meeting a new high since the country’s entry into the euro area (1999 ), at 7.79%, against just over 4% a year ago. “The market is already acting as the obligations Portuguese titles rotten, we must therefore expect further deterioration”, fell within the ING bank in a research note. “The spiral of negative information concerning Portugal continues with vigor,” summed up on Friday, Commerzbank.
The clock continues to run financial
Meeting in Brussels, EU leaders were willing to help “conditional” Portugal, unblocking, like Greece and Ireland, a relief fund whose amount was estimated at 75 billion euros the leader of the finance ministers of the eurozone, Jean-Claude Juncker. But the outgoing Socialist government has again ruled out this possibility, Jose Socrates reaffirmed on Friday that his country had “no need” for a bailout. However, pending the election of a new government at the earliest at the end of May, the financial clock keeps running. And fast. Portugal must repay 4.2 billion euros of debt on April 15 and another 4.9 billion on June 15.
According to economists, this country should have enough money to meet the April deadline, but be unable to fund repayments of June, without new borrowing. Also, “banks may find themselves short of cash well before the government, as was the case in Ireland,” said Daniel Gros of the Center for European Policy Studies. The closure of financial markets is already a reality for public transport companies which are on the brink of “financial breakdown” and threatened to no longer be able to pay salaries, said this week the daily Jornal de Negocios . Tullia Bucco for, an analyst at UniCredit, the solution may pass through the “bridge loans”. “These loans, in the form of direct investments in debt, would certainly help the country to find the funds it needed until June,” she said.
China, which, according to press reports, never denied, has already purchased more than one billion euros of debt Portuguese in January, said she was ready Thursday to “strengthen ties “with Portugal. Other countries, including former Portuguese colonies like Brazil and Timor-Leste, have also repeatedly expressed their “solidarity” with Lisbon, which is expected next week the President of Brazil, Dilma Rousseff. Finally, facing the “peak refinancing” of 15 April, the European Central Bank could again redeem bonds Portuguese “before and after” that date in order to reduce the pressure of the market, said Gilles Moec, economist at Deutsche Bank . But, he cautions, “it will be an exceptional response, pending that Portugal is negotiating for and receiving international aid.”
Source: AFP, The Point – Economy