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Portuguese report
by Euro Reporter
2013-11-19 09:48:36
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Portugal credit line more likely as debt stabilises

Portugal may be able to obtain a new credit line from official creditors when its IMF-EU current programme ends in June 2014 as the country's public debt dynamics are weak but close to stabilisation, Fitch Ratings says. Moreover, Fitch believes that debt restructuring involving the private sector or debt maturity extensions are unlikely as they would undermine much of the fiscal progress Portugal has achieved so far. Fitch forecasts Portuguese public debt to peak in 2014-15 at around 129% of GDP and to decline gradually from 2016 onwards. In our base case scenario, public debt is forecast to fall to 115% of GDP in 2022. This implies an average primary surplus of 3% of GDP over 2016-22, which would represent a substantial improvement on the average annual primary deficit of about 1.3% of GDP in the decade prior to 2008.

Since the start of the programme in 2011, Fitch's assumption has been that Portugal would need further official support when its current programme ends in June 2014. Fitch believes an enhanced conditions credit line is more likely than a precautionary credit line given stringent criteria for the latter. Even if the IMF-EU programme were derailed by political shocks or by a harder stance from Portugal's official creditors, Fitch does not believe private sector involvement (PSI) is likely as it would, among other things, result in a higher upfront outlay from official creditors, and keep Portugal out of debt markets for much longer. Further, Portugal's debt dynamics are not as bad as Greece's were when Greece undertook its PSI debt exchange in 2012.

Similarly, Fitch does not believe that Portugal will opt for a distressed debt exchange involving an extension of debt maturities to fill a financing gap. While a bond maturity extension may reduce immediate gross financing requirements from the official sector and may be less economically disruptive than PSI, it could hinder the country's efforts to regain market access. Therefore, while a distressed debt exchange may seem a more attractive option for creditor countries than PSI, it may not save official creditors gross outlay over the long term as this default could keep Portugal out of the market for a prolonged period.


Portugal looks to privatize national mail company

Portugal's government hopes to raise more than 400 million euros ($540 million) via the sale of a 70 percent stake in national mail company CTT - Correios de Portugal. The government said in a statement Monday it will sell 105 million shares in CTT, S.A., and set a price of between 4.10 euros and 5.52 euros a share.

It said 63 million shares will be set aside for sale to institutional investors. The rest will be made available to the general public and to company employees. No date was set for the sell-off, but it is expected by the end of the year. Portugal is privatizing companies to reduce its debt load as part of a 78 billion euros bailout it received in 2011.


Spectrum use taxes set to rise in Portugal

Portugal is set to increase taxes for the use of frequency spectrum, reports Jornal de Negocios. The current figure of EUR 40 million will go up by EUR 10 million a year, PSD MP Luis Montenegro said during a press conference. The initial proposal of the parties of the government coalition was for an extraordinary contribution to the telecommunications sector, but no deal was reached. Taxes for the use of frequency spectrum have not increased since 2011.

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