Saturday 14 December 2019

Banks back Portugal for Irish-style bailout exit

Pedestrians are reflected in the window of a Banco BPI bank branch in Lisbon, Portugal.
Pedestrians are reflected in the window of a Banco BPI bank branch in Lisbon, Portugal.

Joao Lima

Banks are telling clients that Portugal is strong enough to exit its bailout programme next month without the need for a financial backstop.

The country will probably opt for the Irish route and do without a precautionary credit line, according to analysts at Citigroup, Commerzbank and Danske. At 3.72pc, Portugal's 10-year bond yields are near an eight-year low and last week held its first auction of longer-term debt since seeking an emergency rescue in 2011.

"Portugal is expected to have a clean exit," said Copenhagen- based Danske Bank analysts Jens Peter Soerensen and Anders Moller Lumholtz in a research note.

"We have been recommending Portugal for 2014 and so far Portugal has been the star performer."

Investor sentiment toward Portugal has changed rapidly. Bond yields were more than twice their current level as recently as September on concern that the country might need more aid. A pick-up in the economy and a market rally spurred by the European Central Bank means the country is looking to follow Ireland, which completed its bailout programme in December.

Portugal's €78bn rescue package from the European Union and International Monetary Fund is due to end on May 17. The government will decide on how to leave the programme before a May 5 meeting of euro-region finance ministers in Brussels, Prime Minister Pedro Passos Coelho said last week.

The troika began a final review of Portugal's finances in Lisbon on April 22 and is expected to complete it "sometime" this week, Parliamentary Affairs Minister Luis Marques Guedes said.

The government will hold a cabinet meeting today at which it will likely discuss a budget strategy, he said.

Irish Independent

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