The rating review on Portugal's financial health, due to be delivered on Friday by Canadian agency DBRS, 
looks likely to remain ‘as is’ with Friday’s announcement a crucial test of whether or not the government is making any headway at all in sorting out the economic mess.
Reuters reported today that Portugal's bond yields hit their lowest level in nearly five weeks and last Friday slashed the economy’s deficit target for 2017 to 1.6% from an estimated 2.4%.
This, plus a report in a German newspaper which suggested that the bank of Portugal will be authorised to set up a ‘bad bank’ to soak up the entire banking sector’s Non Performing Loans, has eased tension that DBRS finally would have to admit that Portugal is in a mess and downgrade the country's rating from marginally above ‘junk’ to ‘pure junk.’
One of DBRS's key concerns has been the Portuguese banking sector, but the Handelsblatt newspaper's report has pleased international lenders as the Portuguese banking sector may be able to offload its useless loans onto the taxpayer.
This ‘bad bank’ is plan cooked up by the prime minister and the Bank of Portugal whose governor, Carlos Costa, can not be said to have much grasp on economic affairs after key banking institutions have failed on his watch, BES and Banif the most noteworthy.
By shifting the Non Performing Loans into a 'bad bank' the taxpayer will suffer the losses while the country's banks skip along scott free, ready to repeat the mistakes of the past which has seen bankruptcy, plummeting share prices, restricted loan books and poorly priced mergers become the sector's norm.
