Portugal

Portugal raised 1 billion euros ($1.34 billion) in an auction of short-term debt Wednesday amid signs the country's deep recession has bottomed out, though investors remain wary of the political and economic risks of planned new austerity measures, the Associated Press reported. The government debt agency said it sold 700 million euros in 12-month Treasury bills at a cost of 1.619 percent, which was down from 1.72 percent at an equivalent auction last month. It also raised 300 million in 3-month bills at 0.766 percent, but that was slightly higher than 0.743 percent paid in April.

Portugal’s emergence from its long recession is a sign that the European austerity recipe may work, but it also poses a dilemma for Lisbon and its lenders as a new dose of planned budget cuts may kill a fragile revival, the Irish Times reported. As a result, many economists expect the government to negotiate a new easing of the budget deficit targets during a bailout review next month with its European and IMF lenders, who could in return demand longer-term commitments on spending cuts.

Portugal emerged from 2½ years of recession last quarter largely because of a sharp rise in exports, but economists said further austerity measures required under the country's international bailout program may make the recovery short-lived, The Wall Street Journal reported. Gross domestic product rose 1.1% in the second quarter compared with the first quarter but remained 2% below its level a year ago, according to a flash estimate Wednesday by the country's statistics agency. The economy hadn't registered growth since the final three months of 2010.

Portugal's banks have set aside enough money to cover bad debts and are holding enough capital to weather any deterioration of their loan portfolios, the country's central bank said Friday, summing up its review of their loan books, The Wall Street Journal reported. Bank of Portugal said the group of eight lenders had a core Tier 1 capital ratio of 11.2% as of April 30, above the 10% minimum established by the bank.

Portugal’s ruling coalition and main opposition party will attempt this week to hammer out a “national salvation” pact aimed at overcoming a political crisis that could bring down the government and derail the country’s €78bn bailout programme, the Financial Times reported. In response to a call from President Aníbal Cavaco Silva, the three parties have set themselves a deadline of July 21 for reaching an agreement that will commit future governments to the tough fiscal discipline required to keep the programme on track.

Portugal’s government almost disintegrated last week but has now managed to shore up its support, bringing some calm to the country’s bond market. But the political chaos could still have far-reaching implications, the Financial Times reported. Its chances of regaining full market access now look much slimmer. That means the country will need more money from its troika of international lenders. But that could lead to a debt restructuring – potentially upsetting the tentative peace that the European Central Bank has brought to the continent’s bond markets.

Brussels is preparing a second bailout package for Portugal, according to reports. The European Commission wants to have the so-called “soft rescue” ready for when Portugal’s current bailout expires in the middle of next year, according to an article in Spain’s El País newspaper. The paper cites two unnamed “senior EU sources” as confirming that Lisbon is already negotiating the details of a second credit line, which would come from the European Stability Mechanism.

Portugal's embattled prime minister said he had reached an understanding to keep his government from collapsing, but only after four days of political tremors highlighted the biggest flaw in Europe's strategy for reviving crisis-hit euro members: It isn't working, The Wall Street Journal reported. Prime Minister Pedro Passos Coelho said he had received assurances Thursday of continued backing of the Democratic and Social Center Party, the junior partner in his center-right coalition, despite the resignation of its leader, Paulo Portas, as foreign minister. Mr.

Vítor Gaspar, Portugal’s finance minister and the chief strategist behind the country’s €78bn bailout programme, has resigned in a surprise move that highlights the unpopularity of the government’s tough austerity measures. Mr Gaspar, formerly a Brussels-based economist with no previous political experience, is to be replaced by Maria Luís Albuquerque, currently treasury secretary, the office of President Aníbal Cavaco Silva said on Monday, the Financial Times reported.

A nationwide strike froze public-transport services, shrank hospital staffs and kept many public offices shut across Portugal on Thursday amid a growing consensus among workers and businesses that austerity has reached its limit, The Wall Street Journal reported. Protests and strikes have become common since Prime Minister Pedro Passos Coelho's government took over in mid-2011 to implement measures to control the country's spiraling deficit under a €78 billion ($101.49 billion) bailout from the European Union, the International Monetary Fund and the European Central Bank.