Portugal asks for repayment extension on rescue loan

Portugal has asked eurozone finance ministers for an extension of the loan maturity period for the disbursements the country has received under the bailout programme through the European Financial Stability Facility, in order to have more time to pay.

After a Eurogroup meeting, the Portuguese Minister of Finance Vítor Gaspar said on Monday: “We have a well-founded expectation and signal from our European partners that we can count on this support.”

Gaspar will make the same request next week before the Ecofin Council, composed of the Finance Ministers of the 27 European Union (EU) member states, about the disbursements received by Portugal through the European Financial Stabilisation Mechanism (EFSM).

Gaspar thinks that the sustainability of Portugal’s return to the sovereign debt market is hampered by Portugal facing refinancing peaks between 2014 and 2016, something that he attributes to the fact that the initial loans from the bailout programme have a very short maturity and much shorter than those being currently applied.

The arrangement of Portugal’s bailout programme foresees the total €78 billion loan arranged under the IMF-EU package to be provided in three equal shares of €26 billion, disbursed by the International Monetary Fund (IMF) and the EU, through the EFSF and the EFSM.

According to Gaspar, the Portuguese request to “dilute and defer the payment commitments over a longer period” will now be technically prepared for discussion by the Eurogroup, in a meeting scheduled for March 4.

President of the Eurogroup Jean-Claude Juncker has confirmed that the European Commission will analyse all the problems connected to Portugal’s loan maturity extension. At stake will be the decisions about which loans can have their maturity extended and, most of all,, defining if the respective maturity extensions may or may not imply a penalty on interest rates for Portugal. “Portugal now has the conditions to seize any opportunity presented by the bond market,” said Gaspar.

Stop press

For the first time since it applied for financial assistance, Portugal returned to the sovereign debt market on Wednesday, as the Algarve Resident was going to press.