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| Version 3 | Version 4 |
|---|---|
| Portugal pays higher rate to raise 1bn euros | Portugal pays higher rate to raise 1bn euros |
| (about 7 hours later) | |
| Portugal has successfully raised about 1bn euros ($1.4bn; £873m) but is paying a much higher interest rate to lenders. | Portugal has successfully raised about 1bn euros ($1.4bn; £873m) but is paying a much higher interest rate to lenders. |
| The government had to tap the financial markets to raise money to repay loans. | |
| But Lisbon is paying yields of 5.1% and 5.9% to borrow money for six and 12 months, against the 3% and 4% it was paying to borrow last month. | But Lisbon is paying yields of 5.1% and 5.9% to borrow money for six and 12 months, against the 3% and 4% it was paying to borrow last month. |
| Caretaker Prime Minister Jose Socrates is due to make a statement later after his finance minister said the country needs to resort to aid from the EU. | |
| "In this difficult situation, which could have been avoided, I understand that it is necessary to resort to the financing mechanisms available within the European framework," Fernando Teixeira dos Santos said. | |
| His comments were reported in the online edition of business daily Jornal de Negocios and were confirmed by a finance ministry spokeswoman. | |
| Rescue speculation | |
| Analysts said paying such high rates was unsustainable for an economy that is seeing virtually no growth. | Analysts said paying such high rates was unsustainable for an economy that is seeing virtually no growth. |
| The BBC's business editor, Robert Peston, said the rate is more than the Republic of Ireland was paying before it received bail-out funds and "implies Portugal will have to go for a rescue after its general election" in June. | |
| The markets will also be watching closely to see which institutions subscribed to the bond auction. | The markets will also be watching closely to see which institutions subscribed to the bond auction. |
| There has been speculation that some of Portugal's own banks were refusing to take part unless Lisbon applied for a bridging loan from the eurozone's emergency bail-out fund. | There has been speculation that some of Portugal's own banks were refusing to take part unless Lisbon applied for a bridging loan from the eurozone's emergency bail-out fund. |
| The government has so far insisted it does not need a bail-out. | |
| 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 before the auction details were released that the financial situation in Portugal "has become critical". | Lena Komileva, global head of G10 strategy at Brown Brothers Harriman, told the BBC before the auction details were released 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. |