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Portugal to raise 1bn euros as debt woes continue | Portugal to raise 1bn euros as debt woes continue |
(about 2 hours later) | |
Portugal's bid to raise money in the financial markets on Wednesday could be de-railed by the country's banks, analysts have warned. | Portugal's bid to raise money in the financial markets on Wednesday could be de-railed by the country's banks, analysts have warned. |
Lisbon must raise about 1bn euros (£873m) to help service its debts ahead of a re-financing due in the summer. | Lisbon must raise about 1bn euros (£873m) to help service its debts ahead of a re-financing due in the summer. |
But some of the country's own banks say they may not buy government debt unless Lisbon applies for money from the eurozone's emergency bail-out fund. | But some of the country's own banks say they may not buy government debt unless Lisbon applies for money from the eurozone's emergency bail-out fund. |
The government insists it does not need a bail-out. | The government insists it does not need a bail-out. |
Analysts say Portugal's fund-raising on Wednesday may still succeed despite the banks' ultimatum. | |
But the success may come at a high price. Portugal's cost of borrowing rose to more than 10% for the first time since the launch of the euro. | But the success may come at a high price. Portugal's cost of borrowing rose to more than 10% for the first time since the launch of the euro. |
The jump in yields was sparked by ratings agency Moody's downgrading Portuguese government debt by one notch, to Baa1 from A3. | The jump in yields was sparked by ratings agency Moody's downgrading Portuguese government debt by one notch, to Baa1 from A3. |
The rating is still investment grade - but only just. | The rating is still investment grade - but only just. |
It is the second downgrade by Moody's in less than a month and follows fellow agency Standard & Poor's cut last week. | It is the second downgrade by Moody's in less than a month and follows fellow agency Standard & Poor's cut last week. |
'Confidence crisis' | 'Confidence crisis' |
Lena Komileva, global head of G10 strategy at Brown Brothers Harriman, told the BBC that the financial situation in Portugal "has become critical". | Lena Komileva, global head of G10 strategy at Brown Brothers Harriman, told the BBC that the financial situation in Portugal "has become critical". |
She said: "The government is not just facing a confidence crisis, it is facing a classic, text-book liquidity crisis in the markets. | She said: "The government is not just facing a confidence crisis, it is facing a classic, text-book liquidity crisis in the markets. |
"The Portuguese banks' attempts to force Lisbon towards seeking some sort of bridge loan [from the bail-out fund] increases the risk of a failed auction [on Wednesday]," she said. | "The Portuguese banks' attempts to force Lisbon towards seeking some sort of bridge loan [from the bail-out fund] increases the risk of a failed auction [on Wednesday]," she said. |
Portugal has to repay more than 4.2bn euros in loans on 15 April, and then another 4.9bn euros in June. | Portugal has to repay more than 4.2bn euros in loans on 15 April, and then another 4.9bn euros in June. |
Moody's said Tuesday's downgrade was "driven primarily by increased political, budgetary and economic uncertainty". | Moody's said Tuesday's downgrade was "driven primarily by increased political, budgetary and economic uncertainty". |
Last week, the Portuguese government admitted it had missed its budget deficit target for 2010. | Last week, the Portuguese government admitted it had missed its budget deficit target for 2010. |
Moody's said the increased uncertainty in the country heightened the risks that "the government will be unable to achieve [its] ambitious deficit reduction targets" in the next three years. | Moody's said the increased uncertainty in the country heightened the risks that "the government will be unable to achieve [its] ambitious deficit reduction targets" in the next three years. |