Friday, October 21, 2016

DBRS gives more of an asset to the Government for negotiation with the Brussels Public.en

Before facing the political debate in parliament and the negotiation of exit from the Excessive Deficit Procedure in Brussels, the Government has received from Canada the last trump card that you want: to guarantee that during the coming months, the country will continue to have at least a rating above the level "garbage", and even more so accompanied by some compliments unpublished policy followed by the Government.

The credit rating agency financial DBRS fulfilled what were the expectations of the majority of analysts and has decided this Friday to keep the rating, which assigns the Uk a BBB (low) – the first note above the level of "garbage" – reaffirming also that the trend for this rating is "stable".

Soon, immediately, that this decision ensures is that the country will continue to be able to have access to financing from the European Central Bank (ECB) during a period that is the next six months, that is until the expected date of the next review of the DBRS.

The credit rating agency based in Canada has such enormous power because, at this time, the other three agencies considered by the ECB –Standard & Poor’s, Fitch and Moody’s – place Portugal in the level "garbage". The DBRS is for this reason that separates the country from the bleak backdrop of the loss of eligibility of the public debt in the ECB.

Just for this fact, already there were grounds for that on the Government’s side the feeling was one of relief for the decision by DBRS. But to make the scenario still more favorable, the Executive heard of the agency praises the action that you are going to be helpful, whether in the political debate that is looming in parliament for the approval of the Budget Overall, both mainly in the discussion with Brussels of the budgetary targets and of what is needed for that european rules are complied with.

In a note published along with the announcement of the decision, the agency maintains many of the alerts and the criticism that has been making – such as the retreat in some of the reforms before carried out – but shows signs of being convinced with the results so far obtained the level of budget. The DBRS says for example that a continuation of the trend to “stable” in the rating Portuguese reflects “the progress of Portugal in the reduction of the budget deficit and the proactive measures that have been taken to strengthen the banking sector”.

similarly, although noting that there are still fiscal risks “significant,” the agency points out that “the budget execution to September seems to be in line with forecast, with the hope that the deficit stays below 3% of GDP this year.”

The tone laudatory directed to the Government does not stop here. “The minority Government of the centre-left continues to demonstrate a commitment to complying with the fiscal rules of the EU and it is not expected that the structural reforms in europe are reversed,” says the announcement. And soon after that stresses that “the Government is taking steps to address the vulnerabilities of the banking sector”.

Not supreende so that, in the minutes immediately following the announcement of the DBRS, the Ministry of Finance has expressed its “satisfaction” with the news. “The decision of the DBRS to keep the rating of the Portuguese public debt demonstrates the correctness of the path drawn by the Government to promote economic recovery. This assessment increases the confidence and the markets on policy choices for the country,” said the team led by Mário Centeno in a statement.

For the future, however, the focus of the markets will surely continue to face for the DBRS, mainly in case of doubts in relation to the performance of Portuguese in terms of economic and budgetary. And the agency makes it a point not to abandon the alert tone that has characterized. For example, in relation to the high level of public debt, registered in Portugal and the signs of fiscal consolidation in 2016 may not be sustainable, as the fact that you have resorted to a program of tax amnesty and the freezing of the cativações at the end of this year. “Cutting spending in a sustainable way can be a challenge, as the pressures to relieve the austerity rising in an environment of low growth”, warn the leaders of the DBRS.

For the future, the DBRS makes it very clear what that could lead to a decrease in the rating, which assigns to Portugal: “a weakening of political commitment in relation to economic policies sustainable.”


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