Portugal and truthiness

A recent article in the Guardian indicated that Portugal no longer required a "bailout" because it is being successful raising funds in the bond market. Reality check: "Portugal.. sold €750m of 10-year bonds at an interest rate of 3.5752%, the lowest in eight years, in an auction that was more than three times oversubscribed." Without the ECB ready to write cheques (print Euros) out to repay bondholders in the event Portugal defaulted, that rate would be very much higher. Portugal’s opposition Socialists, ahead in polling for the European parliament ballot and a Portuguese general election next year, did not greet Portugal’s “clean” exit as a success. The result of three years of a punishing adjustment programme, the party said, was “300,000 more unemployed people than originally forecast, a much bigger contraction in the economy than envisaged, public debt above 130 per cent of national output and continuing austerity”. The “troika” of lenders – the European Commission, the International Monetary Fund and the European Central Bank may very well be skeptical. The past socialist president of portugal has stated: “No matter how much [the government] impoverishes people or steals from their pensions, the state will never be able to pay back what it owes,” he said in a radio interview. “When you can ’t pay, the only solution is not to pay.” The Bank of Portugal said on May 7 in a report that the aggregated core Tier 1 capital ratio in the sector rose to 12.3 percent last year from 11.5 percent in 2012. It was 8.1 percent in 2010, before Lisbon resorted to the bailout that is ending this month. The monetary authority said it had started instructing the banks to sell assets, increase capital or limit dividend distribution. So whats really going on in Portugal: the silence is deafening.