Bloomberg News

Portugal, Ireland to Benefit From Greek Deal, Gaspar Says

November 27, 2012

Portugal and Ireland will benefit after European finance ministers eased the terms on emergency aid for Greece, Portuguese Finance Minister Vitor Gaspar said.

“This agreement limits the risks for Greece and for the euro area,” Gaspar said in parliament in Lisbon today. “Portugal and Ireland, which are program countries, will benefit through the conditions opened in the framework of the European Financial Stability Mechanism, according to the principle of equal treatment adopted in the euro-area summit in July 2011.”

Gaspar was referring to the European Financial Stability Facility, said an official at the Finance Ministry.

European finance ministers cut the rates on Greece’s bailout loans, suspended interest payments for a decade, gave that country more time to repay and engineered a Greek bond buyback at a meeting in Brussels that ended early today.

Portugal, which in April 2011 followed Greece and Ireland in requesting a European Union-led bailout, has already been given more time to narrow its budget shortfall after tax revenue missed forecasts and as the economy heads for a third year of contraction in 2013. Revenue this year from tax and social- security contributions will be about 3.3 billion euros ($4.3 billion) less than planned in the budget, Gaspar said Oct. 3.

Portugal’s two-year note yield dropped 28 basis points to 3.945 percent as of 4:59 p.m. in London today. Ten-year bond yields slipped 27 basis points to 7.749 percent. The difference in yield that investors demand to hold Portugal’s 10-year bonds instead of German bunds has narrowed to 6.31 percentage points from 16 percentage points on Jan. 31.

‘Positive Effect’

“The decisions aimed at contributing to the sustainability of Greek debt should also have a positive effect on the Portuguese case, namely those allowing the extension of debt maturities and the deferral of interest payments,” Tiago Veiga Anjos, an analyst at Oporto, northern Portugal-based Banco BPI SA (BPI), said today in a research note.

The interest rate on the financial-aid loans Portugal is receiving is 3.6 percent, Gaspar said on Nov. 6.

The government forecasts debt will rise to 120 percent of gross domestic product this year. Debt will peak at 122.3 percent of GDP in 2014 after reaching 122.2 percent in 2013.

To contact the reporter on this story: Joao Lima in Lisbon at jlima1@bloomberg.net

To contact the editor responsible for this story: Stephen Foxwell at sfoxwell@bloomberg.net


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