DBRS warns of the danger of a disagreement between the Government and Brussels – publico

                 

                         
                     

                 

 
 

The DBRS, the only major agency rating International that does not give the Portuguese debt a rating of “rubbish”, is concerned by the possibility of a prolonged confrontation between the government and Brussels that places the credibility of the commitment of Portugal with the European budgetary rules, warning that may be necessary for the Government to reach a compromise with a “higher fiscal effort.” DBRS leaves unclear who is always evaluating the scope change the rating assigned to the country.

In comments sent to various media on the Budget Outline content State delivered last week by the Government, Adriana Alvarado, the analyst at DBRS, an analysis which is similar to those already made by other agencies rating . Says the official targets for the deficit are “ambitious” and points out that, in particular, the projected economic growth of 2.1% this year “seems optimistic.”

The Economist also notes that ” there is a degree of uncertainty about some of the measures in terms of revenue and expenditure control. ” “Therefore, the official target of 2.6% of GDP deficit by 2016 seems ambitious and can prove to be challenging to achieve.”

Adriana Alvarado then gives special attention to the real effort of fiscal consolidation What is implied in the budget plans of the government, showing it was concerned about a prolonged conflict scenario between Portugal and the European authorities on this matter. “The structural adjustment seems modest,” says the analyst, who although noting that the improvement in the indicator is an improvement compared to the increase recorded last year, remember that still is below what is required by the European Commission.

DBRS shows give much importance that there is an understanding between Brussels and the Portuguese Government, warning that “a commitment to achieve a higher fiscal effort may be necessary.” “A disagreement unresolved with the European Commission could call into question the commitment of the Portuguese Government with EU budgetary rules,” says Adriana Alvarado.

The concern of DBRS with the way the government relates with the European authorities, it comes at a time when the European Commission revealed serious reservations about the OE outline presented by Portugal and may be preparing to require the Portuguese Executive send a revised version of the document.

Adjustments to rating always being evaluated
The rating Canadian origin passed in recent years, to play a key role in Portugal. Among the four agencies which are considerable by the European Central Bank (ECB) as eligible to assess the quality of the assets that are accepted as collateral for their loans, is the one that gives the Portuguese public debt an rating above the level of “garbage”.

A note from DBRS is currently at BB-, precisely the level immediately above the level of “garbage”. If the DBRS lowered the rating , the Portuguese public debt could no longer be used as collateral when, for example, a bank resorted to normal ECB funding lines. Similarly, it is possible that the ECB could no longer buy Portuguese debt under the program of buying assets of the entity headed by Mario Draghi is trying to revive the European economy.

The consequences could be so very serious, not only for Portuguese banks, and for the state that certainly would see interest rates soar debt.

Adriana Alvarado is very prudent when speaking of the impact that budgetary plans submitted by the Government may have the rating assigned by DBRS. But leaves some clear messages. “We are monitoring the developments and we will evaluate the Government’s response to the additional requirements of the European Commission and any budgetary pressures that might emerge,” says the analyst, making it clear that what we want to see is “a credible commitment to fiscal adjustment that Support the sustainability of public finances “. “We monitor continuously developments in Portugal in order to assess whether there should be some adjustment in their ratings “, he concludes.

The next scheduled date for announcing a decision on the rating Portuguese by the DBRS is the 29th of April.