LISBON: Portugal breezed through a key bond market test yesterday, enjoying sharply lower borrowing costs just weeks before it exits a €78bn rescue programme.
The successful bond market auction was crucial for Portugal, showing it can raise its own finances once the international bailout, extended three years ago, comes to an end on May 17.
Portugal will be the second eurozone nation after Ireland to emerge from European Union-IMF bailouts, which have forced crisis-hit governments to apply deeply unpopular austerity measures so as to rein in bulging public deficits. Portugal raised €750m in the auction of benchmark 10-year government bonds, offering a yield of 3.575 percent, according to the body that manages public debt, the IGCP. That was sharply down from the 5.112 percent yield offered in February when the Portuguese government sold 10-year bonds to investors via a syndicate of investment banks.
Auditors from the EU and IMF began a final health check on Portugal on the eve of the bond issue. Ordinary people, however, complain they will go on bearing the brunt of the budget-slimming measures imposed by the terms of the bailout. Those measures, including a new round being applied now, axed public spending, cut pensions and enforced structural reforms to make the economy more competitive and boost exports.
The IMF warned on Monday that Portugal must broaden its commitment to budget discipline to ensure it can carry its debt load and retain the confidence of financial markets. The government is not yet saying how it intends to navigate out of the rescue programme next month.
It could opt for a precautionary line of credit or take the route risked by Ireland four months ago — an outright return to the debt market without any backup. AFP
