Portugal misses bond target

Most Popular posts from other blogs...

March 31, 2011 last updated at 20: 00 GMT losses nationalised bank BNP had admitted in the public deficit, according to European rules which has Portuguese Government, is missing that 2010 budget deficit target will be included.

A total was 8.6% of economic output, about 7.3% of the EU target. Lisbon blame the inclusion of losses in State transport company and a bank.

Portugal's cost of borrowing has increased sharply as bond markets increasingly expect a debt default.

Fresh elections will be held on 5 June, which announced the Portuguese President. A vote of confidence was the minority Government last week after the loss.

Bail-Out delay

The Government short and medium term cost of borrowing has increased rapidly in the last few days as the prospect of a debt restructuring over the next two increasingly looks likely.

The return of the Portuguese two-year bonds hit 8.6% on Thursday - highest since Portugal joined the euro in 1999. The yield has increased and a half by 2.5 percentage points in the last week.

The five year cost of borrowing increased to 9.5%.

The caretaker Government - free of charge after the resignation of Prime Minister Jose Socrates last week until elections expected in may or early June - blame the revised deficit for accounting changes.

Continue reading the main budget deficit: 8.6% (2010) borrowing costs: 8.6% (two year bonds) growth: 1.2% inflation (2010): 3.5% (Feb 2011) unemployment: 11.1% (Dec 2010)

Data source: Bloomberg

Around EUR 1.8 billion ($2 billion, £ 1 billion) in losses at nationalised bank BNP were added, the deficit after a visit to the Ministry of finance by Eurostat, the Statistical Office charged with strict rules for Governments that set financial accounting.

The 8.6% level an improvement on the 10% deficit is recorded yet in 2009.

The Government said that it was targeted still a deficit of only 4.6% for the current year.

Meanwhile said the Finance Minister, Fernando Teixeira dos Santos, that the Transitional Government request not the legal authority to a financial rescue package by the European Union and the International Monetary Fund.

However, he said, they expected, took office - some of this summer "the necessary financing conditions" until a new Government.

Inflation vice

Portugal has been put in an even tighter spot by rising inflation.

On Thursday, it was revealed that this inflation increased to 2.6% in the euro area as a whole, consumer prices.

Inflation at 3.5% is in Portugal.

Not only is this put pressure on household finances, but is also the prospect of an imminent interest rate rise by the European Central Bank.

Market expectations of higher interest rates have added also the increase in Portugal's borrowing costs.