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Portuguese report
by Euro Reporter
2012-07-20 08:08:32
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Portugal’s borrowing costs drop at 2 billion-euro bill sale

Portugal sold 1.25 billion euros ($1.5 billion) of 12-month bills as borrowing costs fell to the lowest since 2010 and below the rate paid by Spain yesterday. The securities due in July 2013 were issued at an average yield of 3.505 percent, the lowest since November 2010, the debt management agency said. That compares with an average yield of 3.834 percent at a previous auction of 12-month bills on June 6. The sale attracted bids for 2.4 times the amount offered, compared with a bid-to-cover ratio of 2.7 in June.

Spain, which is getting a 100 billion-euro bank bailout, yesterday sold 12-month bills at a yield of 3.918 percent. Cyprus on June 25 became the fifth euro country to request a bailout since Greece triggered the European fiscal crisis.

Portugal is cutting spending and raising taxes to comply with the terms of a 78 billion-euro aid plan requested in April 2011 from the European Union and the International Monetary Fund. Prime Minister Pedro Passos Coelho said on March 5 that if the country can’t tap bond markets by September 2013 because of “external reasons,” it would be able to count on continued support from the IMF and the EU.


Portugal decriminalized all drugs eleven years ago and the results are staggering

On July 1st, 2001, Portugal decriminalized every imaginable drug, from marijuana, to cocaine, to heroin. Some thought Lisbon would become a drug tourist haven; others predicted usage rates among youths to surge. Eleven years later, it turns out they were both wrong. Over a decade has passed since Portugal changed its philosophy from labelling drug users as criminals to labelling them as people affected by a disease. This time lapse has allowed statistics to develop and in time, has made Portugal an example to follow.

Portugal's move to decriminalize does not mean people can carry around, use, and sell drugs free from police interference. That would be legalization. Rather, all drugs are "decriminalized," meaning drug possession, distribution, and use is still illegal. While distribution and trafficking is still a criminal offense, possession and use is moved out of criminal courts and into a special court where each offender's unique situation is judged by legal experts, psychologists, and social workers. Treatment and further action is decided in these courts, where addicts and drug use is treated as a public health service rather than referring it to the justice system (like the U.S.), reports Fox News. The resulting effect: a drastic reduction in addicts, with Portuguese officials and reports highlighting that this number, at 100,000 before the new policy was enacted, has been halved in the following ten years. Portugal's drug usage rates are now among the lowest of EU member states, according to the same report.

One more outcome: a lot less sick people. Drug related diseases including STDs and overdoses have been reduced even more than usage rates, which experts believe is the result of the government offering treatment with no threat of legal ramifications to addicts. While this policy is by no means news, the statistics and figures, which take years to develop and subsequently depict the effects of the change, seem to be worth noting. In a country like America, which may take the philosophy of criminalization a bit far (more than half of America's federal inmates are in prison on drug convictions), other alternatives must, and to a small degree, are being discussed.


IMF "reasonably" upbeat on Portugal bailout programme

Portugal's economic adjustment under an EU/IMF bailout has "reasonably strong" chances of success, although rising challenges, mainly from the euro zone crisis, risk deepening its recession, the International Monetary Fund said on Tuesday. In a staff report following last month's mission to Portugal, the Fund said "the extent of fiscal adjustment has been impressive" in the first year of the 78-billion euro bailout. It noted that a slightly milder 2012 economic contraction is now projected compared with the previous review. The IMF said the external "challenges only reinforce the need for determined action in adherence to the programme", which it said could be refined. But the report appeared to reinstate its confidence in the original programme, while in April the IMF had said Portugal's recession may force it to alter fiscal goals. The economy is still expected to decline 3 percent this year after last year's 1.6 percent decline. The previous 2012 contraction forecast was an even steeper 3.3 percent drop.

The Fund on Monday approved a 1.48 billion euro loan disbursement to Portugal, urging it to stick to strong economic policies and reforms so it can regain access to capital markets in late 2013 as the programme envisages. "The authorities are building a convincing track record of meeting adjustment and reform objectives while preserving political support, and prospects of success for the program remain reasonably strong," the IMF staff report said. But it warned of multiple risks to Portugal's performance from a European slowdown, growing debt woes at its neighbour and main trading partner Spain, as well as higher-than-expected unemployment at home. The jobless rate is at a record level of over 15 percent and still expected to rise this year and next. It said market access "will depend on sustained program implementation and improved euro area financing environment".

"Staff nonetheless considers that market access can be regained within the period (by the fourth quarter of 2013) ... but risk remains of delay in market access, and euro area lenders may be called upon to provide adequate support to Portugal so long as performance under the program is on track." It also said the country could accomplish a gradual return to the debt market by lengthening Treasury bill maturities -- a process already under way -- as well as issuing medium-term notes to specific clients. Such notes could serve as a bridge towards issuing longer-dated bonds further down the road. EU officials have repeatedly said they will stand by Portugal if it sticks to the programme's targets and yet fails to fully finance itself in the debt markets after the end of the bailout. Most analysts expect that a second bailout will be needed, although the government says it will not request neither more money nor more time to meet the targets.

The IMF reiterated that this year's budget deficit target of 4.5 percent of GDP remained within reach but cautioned that a recent weakening in revenues spelt risks to the goal. The government has acknowledged there are budget risks, but vowed to tackle them so as not to jeopardize targets. The IMF said that higher-than-expected joblessness and lower domestic demand were expected to generate a gap worth 0.5 percent of GDP with respect to the target, but this could be offset by re-programming of EU cohesion funds, lower-than-expected net interest payments and tight budgetary execution.

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