The Portuguese Bailout Thread

later12

Well since capital markets have already decided that this is an inevitability, I thought it was about time that boards had a thread dedicated to it.

It seems strange to begin on a positive note by remarking that Portugal today raised funds successfully on the bond markets, at a rate lower than recent second hand rates. The rate achieved was about 6,7%
http://www.irishtimes.com/newspaper/breaking/2011/0112/breaking9.html

The reason why the rate was so low today, however, is of course because of the ECB'S bond buying program which has artificially lowered the Portuguese yield.

The current market yields remain in the region of 7%, however.

As far as i am aware, Greece had officially applied for financial support within about 2 weeks of its bond yields having breached the magic 7% figure, whereas ireland had agreed to its bailout within the month of such yields. So we should be reasonably confident about looking forward to how a portuguese bailout unfolds in the near future, despite today's bond auction.

zig

I have to say I found it funny the way this was reported in a completely positive light , are people so ignorant that dont even bother looking at the bigger picture, all that was was a slight retracement in an otherwise rising graph
It closed above the 7% mark again today. Tbh I think its a matter of when not if, but I also think the rest of the EU has prepared for this so it probably wont be that big a deal.
http://www.bloomberg.com/apps/quote?ticker=GSPT10YR:IND

SkepticOne

zig wrote: »

I have to say I found it funny the way this was reported in a completely positive light , are people so ignorant that dont even bother looking at the bigger picture,

The last Irish bond auction before withdrawing and the IMF was also presented as a success. My guess is that the story originates in a press release from the Portugese equivalent of the NTMA and it is in their interest to present it in a positive light even though they may in reality be scared ****less.

later12

What's happening at the moment is simply an exercise in buying time for Portugal: the danger is that they are increasing the sizes of their coupons and the ECB are buying them up with the combined effect to artificially lower yields. They also sold some 5 year paper this week with some very good timing, as Merkel and Sarkozy got together to hammer out the EFSF overhaul and the markets, predictably, were in favourable mood. It was a good move by Portugal, but for now their yields for 10 year bonds still hover up around 7%, which their own debt agency have admitted is completely unsustainable.

nOddyseus

Portugal's 10 year bond yield is now at 7.5%.

ESF-IMF stepping into the scenario is only a few weeks away now I'd imagine.

Sir Oxman

http://www.bbc.co.uk/news/business-12828405

"Portugal's opposition parties have defeated austerity measures in parliament, pushing the minority government to the point of collapse.

The rejection of the proposed spending cuts and tax rises is likely to trigger an international financial rescue.

The vote late on Wednesday came on the eve of a European Union summit to finalise a eurozone debt crisis plan.

The prime minister is expected to address the nation in the coming hours amid speculation that he is to resign.

Economist Intelligence Unit analyst Kevin Dunning told the BBC that this is "crunch time" for Portugal.

"This could be the week when they have to activate the bail-out fund," he said ahead of the anticipated government defeat."

I'd say the time has come, as it always would.

bryaner

Who's next so Spain/ Italy??

emo72

bryaner wrote: »

Who's next so Spain/ Italy??

the media was telling me that spain is to big an economy to bail out. obviously dont believe what the meeja tells me, but, will that be the **** hitting the fan moment?

nOddyseus

emo72 wrote: »

the media was telling me that spain is to big an economy to bail out. obviously dont believe what the meeja tells me, but, will that be the **** hitting the fan moment?

5th largest economy in the EU, with around 20% unemployment and huge budget deficit: http://www.bbc.co.uk/news/business-11756168

Currently 5.2% 10 year bond yield, and having been at around 5% since November 2010 - http://www.bloomberg.com/apps/quote?ticker=GSPG10YR:IND

Having its bank's credit ratings slashed by Moodys and overall credit rating on a downward trend - http://www.irishtimes.com/newspaper/breaking/2011/0324/breaking9.html

Yes, Spain is next and with such a big country like Spain (combined population greater than Portugal, Ireland and Greece), it would surely be the beginning of the end for the Eurozone.

later12

bryaner wrote: »

Who's next so Spain/ Italy??

I think any perceived Italian crisis is a bit of a false alarm, like that of Belgium. Spain is the obvious (possibly inevitable) victim after Portugal, but it all depends on the core European powers and whether they act quickly and decisively to prevent Spain from falling.

My guess is that Spain will be the Eurozone's last wake up call after perpetually putting the crisis on 'snooze', and that Europe will act before a request for intervention by the Spaniards. But, with the structure of the Eurozone as lame as it is, and impending problems with (for example) the Finnish elections this Summer and anti European rhetoric in that jurisdiction, you just never know things can be allowed to slip as, after all, they have up to now.

later12

nOddyseus wrote: »

it would surely be the beginning of the end for the Eurozone.

Or the beginning of the beginning of a real montary and fiscal union, which is what the European single currency ought to have been all along.

The euro was built on political allegiances at the end of the cold war instead of a sound economic framework and if the euro is to survive, this must change. The cold war is over, the European model is firmly established, it is time to build a currency on economic principles.

ei.sdraob

later10 wrote: »

it all depends on the core European powers and whether they act quickly and decisively to prevent Spain from falling.

Dont get your hopes up
We have seen that the EU is incapable of quick action and will endup wasting time on locally driven issues that have nothing to do with the problem
Expect for Spain and Portugal to have to bring in a Tourist tax or something ridiculous like that because "they take away tourists from France and Germany" :rolleyes:

later10 wrote: »

it is time to build a currency on economic principles.

What economic principles exactly?

later12

Surge in Portuguese T-Bill auctions today.

http://www.marketwatch.com/story/portugal-pays-nearly-6-to-borrow-12-months-2011-04-06

LONDON (MarketWatch) — Portugal’s government managed to borrow a little over a billion euros in a closely watched T-bill auction Wednesday, but it paid an eye-watering price that served to underline expectations Lisbon will soon have to seek international assistance in order to avoid default.

later12

ei.sdraob wrote: »

What economic principles exactly?

That the European economy would walk with one pair of legs, not in 17 member states tied together pulling in differend directions.

Put bluntly, it is William Hague's simple assertion that you cannot have a currency without a Government. This means regular, schedeuled meeting of Eurozone heads of state, treasury co-operation, spending controls and co-ordinated fiscal policies (including taxation).

Maybe in years to come the Eurozone will be ready to behave, but right now this 12 year old needs a babysitter.

Laois_Man

Breaking news now. Portugal request EU bailout

rubberdubdub

Suppose FF are to blame here as well. Similarities are striking. Government gets the blame, Opposition speaks loudest, pulls the plug, bailout in, along with new government implimenting the same policies. De ja vouz. Looks like its Frankfurts way all the way Mr Rabbite.

later12

The austerity plan which the Portuguese Parliament rejected is now set to look milder than the austerity plan which Portugal will have to implement in order to receive EU-IMF funding.

http://www.irishtimes.com/newspaper/breaking/2011/0408/breaking3.html

Euro zone finance ministers told Portugal today that it would have to implement new economic reforms that went beyond those proposed by its outgoing government if it hoped to secure aid from the EU and IMF.
Portugal bowed to intense pressure from financial markets and its European partners this week and became the third euro zone country after Greece and Ireland to request financial help from the European Union and the International Monetary Fund.

Like Ireland's case, this is again a case of a state refusing to do for the markets what it is later forced to do by the EU-IMF in a resulting sovereign catastrophe.

It has also emerged that the figure being sought will be in the region of 80 billion euro.

Pete M.

And according to Mr. Rehn, courtesy of RTE.ie, the austerity measures will include 'an ambitious privatisation plan'.

Good to see the IMF are being upfront about how they intend to asset strip the Portuguese people.

later12

Pete M. wrote: »

And according to Mr. Rehn, courtesy of RTE.ie, the austerity measures will include 'an ambitious privatisation plan'.

Good to see the IMF are being upfront about how they intend to asset strip the Portuguese people.

In fairness, this is not a conspiracy - it's about being competitive. Portugal has a ridiculously overprotected, uncompetitive public sector and if selling off underperformig assets could free up capital and improve efficiency, that should be welcomed.

itarumaa

It will be interesting to see what will happen with this bailout. At the moment Finland has a changing goverment since the elections and current, resigning goverment has informed that they will not bring the bailout question under vote, since it belongs to new goverments agenda.

The problem is that new goverment will not be active untill 19 May or later and decision will be needed to be done before 16 May, so there is a good change that decision will not be made in time.