If the Greek crisis has taught us anything over the past few weeks it’s that going from a bail-out back into the financial markets is hard, and any rescue programme should be very conservative when it comes to estimating how much private-sector borrowing a bailed-out country will be able to do.
The recent scare occurred because a Greek gap opened in March 2012, when the original €110bn bail-out programme envisioned Athens dipping back into the bond market. Everyone now acknowledges this is impossible, particularly with 10-year Greek bonds still over 16 per cent, despite Wednesday’s rally driven by the successful Greek parliamentary vote on austerity measures.
As our friends and rivals at the Wall Street Journal have pointed out, detailed reports on Ireland show its programme has become much more conservative, with only about €3.4bn in private-sector borrowing called for in 2012 (originally it was €12.3bn; Greece was supposed to raise €15.9bn in the first quarter of 2012 alone). Read on for our first look at Portugal’s financing assumptions.
In its first detailed report on the €78bn Portuguese programme issued this week, the European Commission shows that Lisbon is not expected to raise any long-term private-sector financing until 2013, when €10bn is to be raised in the bond market. In the first half of 2014, when the bail-out ends, it will need another €6bn (see chart on page 36 of the pdf here).
How ambitious is that? It’s hard to say with two years of economic uncertainty to go, but there’s one additional point that is worth considering. The Portuguese bail-out includes €12bn to shore up the country’s banking system. Portugal has not faced the kind of bank crisis Ireland or neighbouring Spain has, and there’s a decent chance Portugal won’t need all that money. So its private-sector borrowing needs could be significantly less by 2013.
Regardless, those figures, much like the Irish ones, are far lower than was ever expected from Greece. Which yet again shows just how much worse the Greek crisis is from any other struggling country in the eurozone.
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