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Portuguese report
by Euro Reporter
2014-01-31 11:53:29
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Portugal sets course for ‘clean’ bailout exit

After the country’s 10-year government bond yields fell below 5 per cent for the first time in more than three years last week, Lisbon officials have begun openly to entertain the possibility of emulating Ireland’s “clean exit” from its three-year rescue programme. The fact that Portugal can even consider emerging from its €78bn international bailout without the safety net of an EU credit line is testimony to how debt market sentiment has changed in favour of the eurozone’s crisis-hit periphery. Only a couple of months ago many investors and senior Brussels policy makers were convinced the country would need a second full bailout when its current three-year adjustment programme ended in June. But the combination of growing investor confidence that the eurozone crisis is over and a stronger than expected turnaround for the Portuguese economy has made the still comparatively high yields offered by its government bonds attractive to investors. The view that, despite falling since the start of the year, yields on Portugal’s bonds remain high relative to the strength of its economic and fiscal recovery has led some investors, including strategists at BlackRock, the world’s biggest fund manager, to believe that the country’s debt could enjoy a powerful rally.

port01_400In a note to investors, Ralph Solveen, an analyst with Commerzbank, said the likelihood of a successful conclusion to Portugal’s adjustment programme together with “solid economic data and the hunt for yield fuelled by the European Central Bank’s zero interest rate policy” created a positive outlook for its government bonds. This would probably ensure a continuing downward trend in risk premiums and yields. Portugal has emerged from its deepest recession in more than 40 years, achieving economic growth of 1.1 per cent in the second quarter of last year, the strongest quarterly growth in the EU. Allowing for seasonal adjustment, Commerzbank estimates that the economy expanded by about 0.4 per cent on average in the second and third quarters, outperforming Spain. Mr Solveen calls this recovery “the biggest positive surprise in the periphery”. The turnaround has been built on strong export growth. According to the centre-right government, exports rose 24.2 per cent in the four years to December, while imports contracted by 5.1 per cent. The performance, by far the best among comparable EU countries including Italy, France, Spain and Ireland, has rewarded Lisbon with a current account surplus for the first time in two decades, an impressive swing from a deficit equivalent to 10 per cent of national output less than five years ago. Economic recovery is also feeding into a fiscal turnaround. Last week the finance ministry said it would better the 2013 budget deficit target agreed with the “troika” of international lenders – the EU, International Monetary Fund and ECB – by delivering an outcome of 5 per cent or less of gross domestic production, comfortably below its 5.5 per cent objective.

Christian Schulz, a senior economist at Berenberg, says Portugal will still face “significant fiscal headwinds” to meet budget deficit targets of 4 per cent of GDP this year and 3 per cent in 2015. But, he adds: “The economic recovery, falling unemployment, lower borrowing costs and now a better than expected fiscal starting point will make the remaining adjustment easier.” The emerging markets sell-off has had a negative impact on most of the smaller and more vulnerable eurozone countries such as Portugal, where 10-year government bond yields, which move inversely with prices, raised 20 basis points at the end of last week to 5.26 per cent. But this follows a fall from 6.13 per cent since the start of the year and from a 2013 high of 7.51 per cent in July. Most analysts are confident that emerging market turmoil is unlikely to hurt the eurozone periphery more than temporarily. Portugal’s greatest economic vulnerability remains a public debt burden of more than 128 per cent of GDP, and high levels of both corporate and household debt, although the latter two have begun to fall as a percentage of GDP. The country also continues to be rated below investment grade by the main rating agencies, but Standard & Poor’s removed Lisbon from “credit watch” – indicating a higher chance of an imminent upgrade – this month. Increasing investor appetite for Portuguese debt enabled Lisbon to swap €6.6bn of government bonds for debt with longer maturities in December and to issue €3.25bn in five-year debt this month. More than half this year’s €7bn funding requirements are covered, paving the way for Lisbon to tap positive market sentiment to build a significant cash cushion for a post-bailout era that is less than six months away.


UK police in Portugal to interview McCann suspects

British detectives investigating the 2007 disappearance of Madeleine McCann have flown to Portugal to speak to authorities about questioning three potential suspects, British media reported on Wednesday. The team from Scotland Yard travelled to the Algarve after British authorities wrote to Portuguese police to ask for help in tracing three burglars spotted in the area where the British three-year-old vanished. According to the Daily Mirror newspaper, police were preparing to make the first arrests since British officers started to review the case in 2011. Newspapers published photographs of Detective Chief Inspector Andy Redwood, who is leading the UK hunt, arriving in Faro holding two bulging box files.

A spokesman for the British police declined to confirm whether a team was in Portugal or the purpose behind the trip. Madeleine went missing from her bedroom at the Praia da Luz holiday resort in the Algarve while her parents were dining with friends at a nearby restaurant, leading to a global search that gripped the world's media. Police have since found mobile phone records which showed the three men in question made numerous calls to each other in the hours after the youngster disappeared, the Mirror said.

Despite huge international interest and numerous reported sightings from around the world and investigations stretching as far away as Australia, the girl's fate remains a mystery. Her parents were named as official suspects by Portuguese police four months after her disappearance but in 2008 they were cleared and Portugal's public prosecutor later dropped the case, citing a lack of evidence. London police launched a review of the case in 2011 and began their own investigation in July last year.


Portugal’s radio amateurs granted temporary access to 1850-2000 kHz for contests

The Portuguese telecommunications regulator ANACOM has granted radio amateurs temporary use of the extended 160 meter band segment 1850 to 2000 kHz to participate in several major operating events during 2014, and not extending to other use. Hams in Portugal may use that part of 160 meters to participate in the CQ World Wide 160 Meter Contest (CW); the ARRL International DX Contest (CW and phone); the CQ World Wide 160 Meter Contest (SSB); the CQ WW WPX (CW and phone); the King of Spain Contest (CW and phone); the IARU HF Championship; the CQ WW DX Contest (CW and phone), and the ARRL 160 Meter Contest.

“The authorization for temporary use of 1850 to 2000 kHz may not be used for other purposes within the amateur service, nor any other radio services,” the ANACOM announcement said. Operations may not interfere with other radio services. ANACOM said the temporary grant does not infer any expectation regarding future use of the band segment.

On 160 meters, hams in Portugal have access to 1810 to 1830 kHz with 200 W maximum EIRP, and 1830 to 1850 with up to 1500 W maximum EIRP.


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