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Portuguese presidential elections were “non event”

By CHRIS GRAEME [email protected]

The Portuguese vote for continuity and stability in last month’s presidential elections had “no impact whatsoever” on the international markets, an IMF economist said last week.

Cavaco Silva’s re-election, from the market’s point of view, was a non-event that was expected and doesn’t change the current situation,” Filipe Garcia told the business daily Diário Económico.

The same sentiment was voiced by Filipe Silva, a bond market manager for Banco Carregosa, who said that the re-election “completely went unnoticed by the financial markets”.

“It brought nothing new, Portugal will continue to have the same head of state for the next five years as well as the same problems while the solutions are still the same,” he said.

The solutions for most economists remain strict adherence to austerity measures aimed at reducing the budget deficit, public spending cuts, less consumer borrowing and more saving, more effective tax collection, increased exports and greater productivity and competitiveness.

“There wasn’t, in fact, any impact from the re-election on the markets. We’ve got the same government, the same president and the same problems,” he said, adding that for the time being there was “no reason for market investors in Portuguese public debt and lenders to change their perception”.

The comments came after jitters returned to Southern European sovereign debt investors as interest rates for Portuguese sovereign bonds once again topped the seven per cent mark for 10-year bonds.

At the same time, the Portuguese government restated its position that Portugal did not need outside help from either the European Union or International Monetary Fund.

“Portugal does not need financial assistance from any international institution,” said Costa Pina, the Secretary of State for the Treasury at a conference in New York.

Quoted by Bloomberg, the government minister stated that it was “not yet really very clear that the financial conditions on the table from the IMF and EU were reasonable if indeed Portugal needed to seek help from the European Financial Stability Fund (EFSF)”.

At the same time at the World Economic Forum in Davos, German chancellor, Angela Merkel, and the French Finance Minister, Christine Lagarde, reiterated that the Euro currency would be defended “at any cost” and that there was “no crisis with the Euro”.

“There is no crisis with the Euro, rather there is a crisis of European debt which is the biggest threat to European prosperity,” said Angela Merkel.

The French minister admitted the possibility that the European Union could increase the size of the European rescue fund and even issue European bonds – the so-called Eurobonds.

This year the Portuguese state didn’t send official government committees to the most important world international financial and banking forum in Davos.

However, a number of top Portuguese businessmen and economists including José Manuel Durão Barroso, António Guterres, Mira Amaral, Belmiro Azevedo and Carlos Tavares have all attended the event in recent years.

The sky-high interest rates being charged for Portuguese bonds is benefitting anyone who has invested in them in recent months at a time when bank interest rates are at an all-time low and inflation is creeping up.

The average interest rates on 10-year bonds for the period July 2010 to January 2011 has been 6.65% and 5.80% for five-year bonds.