LISBON, Portugal–Portugal held a sale of its 10-year bonds yesterday for the first time since it needed a bailout in 2011, representing a milestone in its efforts to regain investor confidence and prove its contested austerity policies are paying off.
Portugal hadn't sold long-term debt since it needed a 78 billion euro (US$102 billion) rescue two years ago. The three major international ratings agencies downgraded Portugal's credit worthiness to junk status as the debt-heavy country fell victim to the eurozone financial crisis that spooked investors.
Growing concerns that Portugal had too much debt and too little growth made markets uneasy about lending it money. That sent the interest rate, or yield, that the country pays on its ten-year bonds above seven per cent–a rate that made selling debt unaffordable and which compelled Portugal to ask for help from the International Monetary Fund and its European partners.
As the 17-nation eurozone tries to reduce its debt load, Portugal has been at the heart of the debate about the merits of the austerity policies demanded by the bailout creditors in return for their loan.Many Portuguese and international economic experts blame the last two years of pay cuts and tax hikes for the record jobless rate of 17.5 per cent. The government forecasts a third straight year of recession in 2013.
But Foreign Minister Paulo Portas told a business meeting in Lisbon the bond sale was evidence the government's economic reforms are working. Yields on Portuguese ten-year bonds have recently fallen to around 5.5 per cent.
AP
