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Doubts over Portugal's ability to cut debt levels
By Barry Hatton |
September 22, 2010, Wednesday
|
Print Edition
Print Edition
PORTUGAL'S borrowing costs jumped to their highest level since the adoption of the euro amid uncertainty over whether the government can cut the country's debt levels.
The interest rates on Portuguese 10-year bonds leaped on Monday to 6.5 percent from 6.05 percent at the start of the day. The rate was the highest since the Portugal adopted the euro in 1999.
The rise came two days before a planned bond issue which aims to raise up to 1 billion euros (US$1.3 billion).
Portugal, which has struggled to generate economic growth in recent years and has become burdened with additional welfare costs as the jobless rate surpassed 10 percent, is viewed as one of the euro zone's most vulnerable members because of its high debt load. The center-left government is currently preparing next year's state budget which it says will slash the budget deficit to 4.3 percent of gross domestic product.
It says its austerity plan will reduce the budget deficit to 7.3 percent this year from 9.3 percent in 2009.
However, a lack of detail about its plans and predicted low growth this year have deepened investor concerns.
The interest rates on Portuguese 10-year bonds leaped on Monday to 6.5 percent from 6.05 percent at the start of the day. The rate was the highest since the Portugal adopted the euro in 1999.
The rise came two days before a planned bond issue which aims to raise up to 1 billion euros (US$1.3 billion).
Portugal, which has struggled to generate economic growth in recent years and has become burdened with additional welfare costs as the jobless rate surpassed 10 percent, is viewed as one of the euro zone's most vulnerable members because of its high debt load. The center-left government is currently preparing next year's state budget which it says will slash the budget deficit to 4.3 percent of gross domestic product.
It says its austerity plan will reduce the budget deficit to 7.3 percent this year from 9.3 percent in 2009.
However, a lack of detail about its plans and predicted low growth this year have deepened investor concerns.
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