Government rejects final troika tranche

Interest rates wobble as Government rejects final troika tranche

The day after the Bank of Portugal declared the country needs another four years at least of austerity, financial commentators are reporting that risks for Portugal have increased with the government’s decision not to take up the final tranche of bailout money.
Interest rates on Portugal’s debt were dropping, reports online website Económico, but started to rise again “moments before the government announced its decision to abdicate the last tranche of international assistance”.
Finance Minister Maria Luís Albuquerque announced yesterday that the coalition government was not going to make the deadline set by troika bosses to present new money-saving measures needed to make up the shortfall caused by the recent Constitutional Court veto over pay and pension cuts.
This way, Portugal will end up having received only 76.4 billion of the 78 billion euro bailout originally agreed.
Albuquerque explained the decision on the basis that if Portugal had pushed for the money, it would have had to extend the terms of the adjustment programme – and that would have lost the country credibility.
But as Agence France-Presse and others point out, the Portuguese economy remains distinctly fragile, “contracting 0.7 per cent in the first quarter”.
“While public deficit has been halved to 4.9 per cent since the bailout began, Portugal’s overall debt continues to balloon, reaching 129 per cent of output”, warns AFP.