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London, 09 May 2014

Moody’s Investors Service has today upgraded Portugal’s government bond rating to Ba2 from Ba3. In addition, the rating agency placed the Ba2 rating on review for possible further upgrade.

The rating action was triggered by the following key factors:

  • Portugal’s fiscal situation has improved more rapidly than initially targeted and the public debt ratio will start declining this year, albeit from a very high level. The budget deficit was reduced a full percentage point of GDP more than envisaged last year, indicating the government’s strong commitment to fiscal consolidation.
  • The country will conclude its three-year EU/IMF support programme in the near future, without the need for a precautionary credit line from the European Stability Mechanism (ESM). Portugal has regained access to the public debt markets and in addition the government has built up sizeable cash buffers.
  • Portugal’s economic recovery is gaining momentum, with signs of broadening beyond exports, which continue to perform strongly. Moody’s believes that economic growth will be sustained over the medium-term because the Portuguese authorities have implemented a wide range of structural reforms.

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OVERVIEW

  • We expect Portugal to achieve its program fiscal deficit target of 5.5% of GDP in 2013 as the economy stabilizes.
  • In our view, the coalition government remains committed to the EU/IMF program.
  • We are therefore removing our long-term sovereign credit rating on Portugal from CreditWatch with negative implications, and affirming the ratings at ‘BB/B’.
  • The outlook is negative, reflecting what we view as ongoing social and political risks associated with deleveraging efforts by Portugal’s highly indebted private and public sectors, as well as financing uncertainties related to Portugal’s exit from the EU/IMF program, expected in May 2014.

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source: trasparency.org

Transparency International has consistently warned Europe to address corruption risks in the public sector to tackle the financial crisis, calling for strengthened efforts to corruption-proof public institutions.

Denmark, Finland and New Zealand held on to their top slots in the ranking, while Afghanistan,North Korea and Somalia remained at the bottom.

Greece is ranked the most corrupt country in the 27-nation European Union.

source: bloomberg