Portugal Archives - Economy Watch

Using Portugal as an Explainer for Europe

Portugal’s 10-year bond yield is up almost 120 bp this year. It is one of the few Eurozone members that still pay to borrow two-year money. There are two set of drivers. One set is country specific. These may matter only to current or prospective investors. The other set of considerations may have broader applicability. This means that even those without direct exposure may want to take note of developments in Portugal.

A few country-specific considerations are worrisome.

IMF Says Portugal’s Growth Constrained by Heavy Debts

While many nations in Europe have been experiencing healthy levels of economic growth over the last few years, there are a few notable standouts. Portugal is one nation with such a dubious distinction. Unfortunately, the International Monetary Fund (IMF) warns that, despite its economic growth, Portugal’s condition will not improve until the country gets a handle on its debts.

Portugal is Growing So Will It Need More Austerity?

A NATO country has shot down a Russian plane. The refugee influx is threatening to unravel the Schengen Treaty of free movement. Germany’s Merkel celebrated her tenth anniversary as Chancellor this past weekend, but she faces one of the most serious challenges of her tenure.

Portugal accounts for less than 2% of the Eurozone GDP. We argue that like Greece, Portugal’s importance is greater than the size of its economy. Among the political challenges Europe faces, the Iberian Peninsula should not be under-estimated.

What Happened in Portugal?

Portugal’s minority center-right government has collapsed. It was less than two months old. Its downfall made possible by the willingness of the Socialists, the main opposition party to form a majority with the Left Bloc, Communists, and Greens. They garnered 123 votes in the 230-seat parliament to defeat Coelho’s program. Coelho led a majority government until last month’s election that saw it reduced to a minority.

Did Austerity Work in Portugal?

Austerity works. That is the message of Pedro Passos Coelho, the Portuguese prime minister, to voters. After three years of recession, Portugal registered a return to growth of 0.9% in 2014, exited its three-year bailout and the economy is projected to expand a further 1.6% in 2015 and 1.8% in 2016.

Portuguese Economy Makes Progress in the First Quarter

Portugal’s economy expanded 0.4 percent compared to the last quarter, but analysts expected higher growth of 0.5 percent. Portugal owes its growth to higher domestic demand and exports. The government forecasts a growth rate of 1.6 percent for 2015.

Portugal Determined to Reach 1.5% Economic Growth

The recent collapse of the Espirito Santo banking Business Empire in Portugal has had a significant impact on the country. However, the Prime Minister, Pedro Passos Coelho, announced that it would not prevent the economy from growing 1.5% in 2015, as forecast. However, although the country may still meet its economic goals, it is unlikely to expand any further. Moreover, there is nothing special about 1.5%. Those low standards seem to be fine for California, New York, and Oregon.

Portugal Skips Final Bailout Financing

Portugal has decided to forgo to a final 2.6 billion euros in funds due under its international bailout programme, choosing rather to finance itself in bond markets, reported Reuters on Friday.

Finance Minister Maria Luis Albuquerque told journalists that the decision was taken because of a “calendar incompatibility”, as the government was still waiting on the nation’s constitutional court to approve budget measures.

Portugal To Make ‘Clean Break’ From EU-IMF Bailout Programme

Portugal will exit its three-year 78 billion euro bailout programme this month, announced Prime Minister Pedro Passos Coelho on Sunday, opting not to seek a precautionary credit line from its lenders; choosing rather to rely solely on markets for its financing needs.

“It’s the right choice, at the right time,” Coelho said, after a cabinet meeting in Lisbon. “We are making this choice because the strategy of returning to the market was successful, and because we made enormous progress in budget consolidation and because we recovered our credibility.”

EU Spending Cuts Could Lead To Food Shortages For Portugal’s Poor: Report

The European Union’s plan to cut nearly 40 percent of its food aid programs to Portugal could lead to hundreds of thousands of poor people facing severe food shortages, according to a report by Reuters, with nearly 22 percent of the Portuguese already suffering from material deprivation, including almost 9 percent from severe deprivation.