Portugal To Make ‘Clean Break’ From EU-IMF Bailout Programme
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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.”
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.”
“We have financial reserves for a year, which protect us from any external disturbance,” he claimed.
The clean exit from the three-year rescue program caps a surprising turnaround for Western Europe’s poorest economy, which last year began a slow climb out of recession.
They become the third stricken eurozone country to exit a bailout programme after Ireland and Spain, leaving only Greece and Cyprus as the only euro-area countries still under a bailout regime.
Related: Spain Exits Bailout Programme, Concerns Remain Over Unemployment
Related: Greece To Exit Bailout Programme In 2014, Says PM
European finance ministers are expected to endorse Portugal’s exit during a two-day meeting that starts on Monday. The European Commission has already said it would “support the government and the Portuguese people”.
Meanwhile, Christine Lagarde, the head of the International Monetary Fund, said the decision meant “Portugal is now able to complete the consolidation of public finances”.
[quote]“Although uncertainties and challenges remain, Portugal is now in a strong position to complete the consolidation of public finances and further deepen structural reforms, which will be essential to achieve sustainable growth and job creation,” she said.[/quote]The Portuguese economy is expected to grow by 1.2 percent this year, as it embarks on a recovery process. Unemployment is down to 15.3 percent, from a peak of 17.7 percent.
The country’s borrowing costs have also dropped significantly, to signs of economic recovery and a market rally spurred by the European Central Bank’s pledge to do what it takes to defend the euro.
In April, Portugal issued 750 million euros worth of 10-year government bonds in the first such offering since the bailout started in 2011. The bonds were sold with an average yield of 3.575 percent, the lowest interest rate Portugal has ever received for 10-year debt.
But some problems still remain. The country’s debt soared to 129 percent of GDP, from 93 percent at the start of the bailout, as the government scrambled to rescue struggling state companies and kept paying high subsidies to energy providers.
International creditors are due to remain monitoring Portugal’s finances even after it exits the bailout programme, with the nation only able to repay its last loan to the I.M.F. by 2024 and its last European loan in 2042.
