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Some cheer for beleaguered Portugal

Thursday, September 20 09:42:23

The ECB bond buying arrangement is working for countries such as Ireland and Portugal who are compliant in reducing deficits in accordance with Troika requirements. Portugal's interest rates fell steeply in a short-term debt auction yesterday where it borrowed E2 billion ($2.61 billion), evidence that the European Central Bank's recently-unveiled plan to intervene in bond markets is boosting investor confidence.

Portugal has not had much to cheer about in recent months so the reduction in it's external cost of short-term borrowing comes as a significant boost to morale, if nothing else.

The Treasury and Public Debt Management Agency said it raised E1.291 billion in 18-month bills, paying a rate of 2.967 percent compared with 4.537 percent in the last comparable auction in April. It said there was market demand for double the amount on offer.

The drop in borrowing rates is a positive sign for Portugal, which needed a E78 billion bailout last year when, after a decade of weak growth, it was engulfed by the financial crisis plaguing eurozone countries. Portugal is locked into a debt-reduction and economic reform program demanded by lenders in return for the financial rescue. It has earned praise for abiding by the agreement despite a recession which is forecast to extend into next year and a record unemployment rate of 15.7 percent.