31 March 2014

Portugal's programme remains well on track

As reported by the Europe Online Magazine, Portugal‘s budget deficit fell to 4.9 per cent of gross domestic product last year, well below the 5.5 target set by bailout creditors, statistics institute INE said on Monday. The government attributed the fall to a rise in tax revenues.

The government agreed to trim its budget deficit in an agreement with the European Union and International Monetary Fund (IMF) in 2011 in return for a bailout worth €78 billion after Portugal‘s borrowing costs soared and it was threatened with insolvency.

Reuters reports that eurozone Finance Ministers will discuss the best way for Portugal to fully return to market financing at their meeting on 5 May, the chairman of the ministers Jeroen Dijsselbloem told a news conference.

Portugal will exit from its 3-year international bailout, which allowed it to borrow from the euro zone bailout fund rather than markets, on 17 May. Lisbon has to decide by then if it wants accompany the exit with a request to the euro zone for a precautionary credit line, in case market borrowing rates are still too high, or if it is confident it can fully return to market financing. 

In his statement following the Eurogroup meeting on 1 April, Jeroen Dijsselbloem said: "On Portugal we took stock of the state of play. The programme remains very well on track. The economic recovery is strengthening, the stabilisation of the financial sector is progressing and yields on sovereign debt have continued to tighten. The process for completing the 11th review mission is on-going and a decision on the disbursement of €1.2 billion is expected to be taken by the EWG on 24 April once prior actions and national procedures are completed.    There is still some time before the end of the programme which runs out on 17 May and there is still one review to go. So we will come back to Portugal's exit strategy at our meeting on 5 May after the twelfth and final review mission is concluded."