sábado, 2 de abril de 2011

FINANTIAL TIMES: Fitch close to junking Portugal

Portugal is left with one notch above speculative grade. It’s on negative watch. S&P currently has Portugal at BBB (negative), while Moody’s recent cut to A3 is now already looking an outlier.
We expect there’s a good chance Portugal will be junk at all three ratings agencies before or soon after a bailout is arranged. Fitch thinks EU/IMF support is positive for credit. However, we’d also point to potential credit risks to bondholders from this bailout, if further loans are needed after 2013. Those loans would be senior.
Fitch explains its action further:

“The severity of the downgrade by three notches mainly reflects Fitch’s concern that timely external support is much less likely in the near term following yesterday’s announcement of general elections to take place on 5 June,” says Douglas Renwick, Director in Fitch’s Sovereign Ratings Group. “Fitch identified timely external support as a key rating trigger when it downgraded Portugal to ‘A-’ on 24 March. The agency views external support as necessary to bolster the credibility of Portugal’s fiscal consolidation and economic reform effort, as well as secure its financing position.”

In addition, the significant upward revisions to the 2010 public debt and deficit figures (now 92.4% and 8.6% of GDP, respectively), also announced yesterday, have further weakened Portugal’s fiscal profile and underscores the magnitude of the fiscal consolidation challenge facing the new government. The rejection in parliament of measures to strengthen the 2011 budget and the upcoming elections mean that further consolidation will likely not be implemented until Q3 2011 at the earliest. Given the weak macroeconomic outlook, Fitch sees a significant risk of slippage from the official deficit/GDP target for this year of 4.6% of GDP.

Fitch views an IMF/EU financial support package with strict policy conditionality as necessary to secure sustainable financing and restore medium-term debt sustainability and investor confidence in Portugal. Any delay in securing a credible IMF/EU supported policy programme increases the risks to economic and financial stability, while the current crisis is likely to worsen the economic downturn.

Quick question: was ‘timely external support’ really ever that reliable enough to hang so many ratings notches on it? Indeed Portugal had been playing brinkmanship with the eurozone for months.
A less quickly answered question: what does the ECB do now?
It has already added Ireland to Greece in the sovereign bonds granted ratings waivers for banks pledging them as collateral. Portugal is looking next at this rate. Like we also said… it’s not ratings bringing sovereigns down, it’s the rules requiring ratings.
Related link:
Get yer collateralised Portuguese bonds here – FT Alphaville
This entry was posted by Joseph Cotterill on Friday, April 1st, 2011 at 18:19

Meus senhores... leiam bem com atenção este artigo do FT com a explicação oficial da Fitch com a justificação por que baixou o rating Português.
A razão é precisamente a que já anunciei em posts anteriores, porque a Fitch não acredita que o pais aguente sem ajuda externa até 5 de Junho, e ainda por cima com um governo que diz que não pode / não quer pedir a dita ajuda.
O presidente da Republica em vez de por ordem neste forrobodó, ainda ajuda a por gasolina na fogueira.

Estamos entregues à bicharada.

Cumprimentos cordiais

Luís Passos

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