Portugal remains defiant

Portugal
has denied it will struggle to raise capital from international investors after
yields on Portuguese government debt hit record highs.

“There
are no reasons to think that Portugal does not have conditions to keep tapping
the markets,” said Cabinet Minister Pedro Silva Pereira.

Earlier,
the European Central Bank (ECB) intervened to buy Portugal’s debt after yields
rose sharply.

The
rise in yields renewed concerns Portugal may need financial assistance.

In
early trading, yields on Portuguese 10-year bonds rose to almost 7.6 per cent,
their highest since the introduction of the euro.

The
ECB acted swiftly to prevent yields moving higher by buying up bonds in the
secondary market. As a result of its actions, yields fell to below 7.2 per cent.

Mr
Pereira attributed the earlier rise in yields to fresh concerns about government
debt levels across Europe, rather than any specific fears about Portugal.

“This
has to do with sovereign debt markets, and not only in relation to Portugal,
but rates at the European level – all subject to speculative moves attacking
the euro.”

Last
month, Portugal raised $1.7 billion in an auction of four and 10-year bonds.
The yield – the interest rate Portugal agreed to pay to borrow funds – was an
average 6.7 per cent.

Worries
about government debt levels had subsided in recent weeks, following widespread
speculation at the end of last year that Portugal may need to seek some sort of
bail-out from the EU.

This
followed an 85 billion-euro bail-out package for the Irish Republic. Greece was
also bailed out last summer to tune of 110 billion euros.

Lisbon
has long argued its situation is different to Greece and the Irish Republic
because its deficit and debt are lower. It says it has not suffered a crash in
property prices similar to the Republic.

However,
some analysts still believe the country will need to seek funding help.

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