Chillin' out till it needs to be funded
Preview: Portugal was able to raise EUR 1.25 bln in 11 month paper and EUR 0.5 bln in 6 month paper at 5.90% and 4.346% on Jan 18, 2012 a full point lower than the earlier auction of one year securities and the same yield for the 3 month bills in the December auction. It also raised more than a billion in 3 month paper on Jan4 and another EUR 750 mln in 6 month bills.
However, the 2012 budgeted finances are not sufficient as per Finance minister Texeira Dos Santos. And the ICGP numbers for short term financing apparently not good enough. The Portugese 10 yr yield continues at 14.2% and the beleaguered state would like to keep its options open. The country’s debt agency ICGP had earlier estimated 2012 requirements for external funding to be $22 bln or EUR 17.4 bln as per their statement of Dec 30 apart from the 78 bln bailout with IMF and ECB.
Meanwhile Italy’s Mario Monti also decided austerity wasn’t cutting it and got himself a EUR 40 bln from the UK even as IMF’s noise on needing more funding for its bailout funds is being increasingly ignored and the Hellenic Summit games also showing moreinterest in German stance on the ESM.
Portugal was a longstanding believer in austerity and surplus on its own and after PM Jose Socrates gave up on reform and left, the nation had to go for a bailout having kept a tight rein on spending and degrowing in the Economy. For it the next two years are a bitter recession if it goes by the budget alone and the new Fiscal compact is likely to put the most squeeze on it for having decided to accept tighter conditions. Whatever may be the reasons, today the media has cottoned on to the new cries for a bailout coming from the westernmost point on the continent. Join us inthe investigation of what you think is the reason why!
Meanwhile hedge fund Neptune and bank commentators with an eye on the Monti deal with UK are relatively more comfortable with Italy’s plans for 2012 and 2013. Portugal is looking fr return to growth in 2014 but is degrowing by 6% and 3% in these two years, while Italy is mising the UK borrowings with an almost surplus budget for 2013 itself
Interestingly UK is almost EUR 300 bln in exposure to Italy already as I remember and UK is already on a Debt GDP ratio of 500% , in line for the downgrade that made Portugal see the difference. Any new funding for Portugal will be for a A+ rating, which has actually stabilised funding conditions for most of Europe and US banks and funds are back in play across the pond.