Prime Minister José Sócrates has this week said he has a responsibility to ten million Portuguese to not apply for an international financial rescue plan, in what is now the clearest indication yet that Portugal will not seek a bail-out on their own initiative. His comments came in the week when Portuguese bonds were sold off at rates deemed “unsustainable” even within Government circles, amid mounting calls from abroad for the country to open its books to international scrutiny and manipulation.
Portugal this past Wednesday raised one billion euros from the sale of Treasury bonds. The bad news is that it came at a yield 50% higher than the last sale of the very same September 2013 bond six months ago.
The 5.99% return investors can expect from purchasing these government bonds is also the highest rate Portugal has had to accept since joining the Euro Zone.
Treasury Secretary Carlos Pina admitted this week that while agreeing to pay these yields is “unsustainable” even in the short-term, he stood by his prime minister in arguing against a bail-out.
Instead, Mr. Pina pinned his hopes on the 24-25 March European Union summit.
The expectation in Lisbon is that EU leaders will accept that keeping Portugal from losing its economic sovereignty will spare countries such as Spain and Belgium a similar fate through contagion, forcing the EU to approve a ‘hand-out’ as opposed to subjecting Portugal to the humiliation of asking for a bail-out.
The prime minister was adamant this week that Portugal could solve its own problems, and suggested that even if it were to fail in its attempts, calling on foreign aid would be signing away the country’s sovereignty.
“The country would lose its prestige, besides also losing its dignity”, Mr. Sócrates told a gathering of supporters earlier this week in the northern city of Viseu.
“When I hear leaders of the opposition saying that the International Monetary Fund will intervene sooner or later, that aid from outside is inevitable, I want to say quite frankly that there are limits to everything. Currently, the responsibility of any political leader is to place complete trust in the Portuguese people and have confidence in the country”, he explained.
Suggesting the country was under siege both on a domestic and international level, the prime minister sounded the battle cry: “We are here to defend our country and to take all measures at our disposal which we believe would serve the interests of all Portuguese. We are not afraid of being penalised from an electoral point of view, because now is not the time to think about opinion polls or political careers.” Mr. Sócrates’ ruling-Socialists have become increasingly unpopular since a wide range of austerity measures were forced on to taxpayers at the beginning of the year.
An editorial comment in The Financial Times on Monday, seemingly in anticipation of the Portuguese prime minister’s patriotic statements the following day, summed up a growing sentiment outside Portuguese borders: “Ideally, Portugal would emulate Spain and adopt structural economic reforms aggressive enough to relieve market pressures. But if Portugal must apply for aid, it should do so pre-emptively rather than delay to the point where public opinion sees the request as a national humiliation. The lesson from Ireland is that, if a financial rescue becomes essential, it is best launched in a political atmosphere not poisoned by rancour and pride.”
Brendan de Beer