The Canadian ratings agency DBRS has kept Portugal’s financial system on life support by maintaining its rating at one point over ‘junk’ status at 'BBB(Low) Stable', to the relief of the socialist government and Portugal’s international creditors.
The rating with a “stable” outlook was enough to keep Portugal out of trouble and safely in the European Central Bank’s bond buying programme, despite the country’s soaring borrowings and a lack of any real effort over reforms, relying instead on tax increases.
Mutterings of ‘second bailout’ have receded, accompanied by a grandiose statement from Canada that gave reasons for the unaltered rating, including such waffle as Portugal “being in the eurozone and the country’s adherence to the EU economic framework, which helps foster credible macroeconomic policies.”
The agency’s top analyst said there are significant challenges ahead, especially over the national debt level coupled with slow growth and a corporate sector bogged down by debts.
DBRS seemed pleased that Portugal was making headway with its banking sector and is one of those institutions that would welcome the establishment of a national ‘bad bank’ to shift domestic banks’ bad debts onto the taxpayer, thus freeing up the banks to behave as they have before with ill-considered investments in speculative ventures run by the chosen business elite.
The Finance Ministry under Mário Centeno (pictured) claims a victory with the DBRS assessment, unchanged since 2010, stating that the decision showed the government was on the right track to promote growth.
The criteria used by DBRS failed to note the collapse in exports and that economic growth has been way below that required for the country to make any headway at all. The Candian agency believes the year-end deficit will be below the magic 3%.
Next year’s draft budget points to more austerity, dressed up as rises in indirect taxes, and aims for an overall deficit of 1.6% in line with EU requirements.
The other three key ratings agencies have not been so accommodating to Portugal's lac of progress and since 2011 have marked its debt as something to avoid.
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