In the latest sign that the financial gloom over Europe is lifting, Portugal joined other cash-strapped governments to raise money on bond markets — and find it cheap.
Associated Press (AP) reported last night that Portugal collected 3.25 billion euros ($4.4 billion) from a sale of five-year government bonds yesterday – the first sale of its kind since the start of the country’s adjustment program in 2011.
The excellent news is evidence “at least in the markets” that the government’s austerity strategy is working.
The yields, or interest rates, that Europe’s troubled economies pay on their loans have fallen steeply as investors have become more optimistic, explains AP.
“Nursing Europe back to economic health is seen as vital for global growth”.
Describing yesterday’s sale as “very successful”, Finance Minister Maria Luis Albuquerque said there was demand for 11 billion euros of bonds, with the yield at an affordable 4.66 percent.
At the height of Portugal’s troubles in 2011, the yields on its 10-year bonds soared to a crippling 18 percent.
Confidence in European bond markets has improved steadily since the summer of 2012, when the European Central Bank said it was ready to do “whatever it takes” to keep the currency union together. The bank said it was ready to buy an unlimited amount of bonds from any eurozone country that requested help. That increased investors’ confidence to buy the bonds of countries like Portugal that are still struggling economically.
Fears that the country will need a second bailout, like Greece, have thus faded, though AP admits that ‘success’ has come at a heavy price for Portuguese citizens – struggling in an economy without growth.
And despite all the good news, the world’s three main international ratings agencies still classify Portugal’s bonds as junk, adds the news service.
