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gency 'Fitch Ratings' believes that Portugal should apply for a precautionary programme of stand-by credit rather than fending unaided in the international funding market.
According to principal analyst for Fitch in Portugal, Michele Napolitano, it would be a significant and positive move in terms of Portugal’s overall credit rating if the government applied for a precautionary programme.
"A precautionary credit line would be important for Portugal regardless of whether or not it has access to the international funding market," said Napolitano who added that a cautionary programme would be beneficial because "the financing needs of the Portuguese Government will be very significant in the coming years, so the country will have lower debt servicing costs which would help economic growth."
But the most important reason for a precautionary programme to be available to Portugal’s treasury is due to the conditions that the country would have to fulfill to have access to this type of programme - Big Brother would still be watching.
"There probably would be kinder credit terms, which would make us more confident that regardless of who is in power, the Republic of Portugal will continue to adopt fiscal policies aimed at reducing the public debt ratio over the medium term," explained Napolitano.
As for the rating that Fitch assigns to Portugal, it would be more positive if Portugal asked for a precautionary programme having successfully completed the current rescue programme which is scheduled to end on 17 May. The level of public debt is still very high and, according to projections by Fitch, even if the public debt begins to fall this year it will still be around 115% of Gross Domestic Product in 2020.
The president of the Portugal’s Public Finance Council, Teodora Cardoso, commented that any programme should not be imposed but should be negotiated and that Portugal will be safer at the end of the adjustment programme period if it goes for a precautionary programme and that this should not been seen as a weakness or as a negative factor.
Teodora Cardoso justifies a second line of credit as there is “a very great uncertainty hanging over Portugal,” as there is in the financial markets generally.
How this will sit with the Government’s big beasts remains to be seen as there has been a group denial from ministers that any such secondary credit programme would ever be necessary as everything is going so well and no additonal help will be needed.
