Earlier, we disclosed that concerns that the IMF could be called in shortly to rescue Ireland was the reason for Irish CDS to hit new records. It now turns out that another of the PIIGS may be in need of an imminent IMF rescue, namely, Portugal whose CDS is also surging. According to Diario de Noticias, "Portugal may be required to seek assistance from the International Monetary Fund (IMF) to address the problems of external financing." At least Tim Giethner's little Scam Test diversion bought Europe a quiet summer, full of vacations that would not be bothered with a stark reminder of just how ugly things are about to turn.
From DN (google translated):
Former finance ministers say that foreign intervention will be needed to cover issues of public debt
Portugal may be required to seek assistance from the International Monetary Fund (IMF) to address the problems of external financing. The conviction is three former finance ministers, heard by the DN, they say that rising interest rates and falling demand in the issuance of treasury bills (see box) will lead "sooner or later" to a situation where the State can not put in the debt markets. Eduardo Catroga, Career and Miguel Medina Beauty consider the fact that the latest issue of treasury bills have registered an average rate higher than ever is a "signal" the possibility of it becoming a very real scenario for the country
For Medina Carreira, what is happening in terms of public debt "is a tragedy." "This appeal to runaway foreign debt will make the deadline, there is a constraint to financing markets. Investors will simply cease to lend us money," warned the former finance minister, stressing that "when this happens, we have no alternative but to resort to the IMF to stem the problem. "
Eduardo Catroga has similar view, for whom the current funding model of the state, using successive issues of public debts, "unsustainable." The DN, the economist said that "sooner or later the IMF or the EFSF [European Financial Stability Fund] will eventually come to Portugal to bring order to the situation," emphasizing that "the country can not live permanently in debt" .
Referring to the increase of 14.2 billion euros in net debt Portuguese public between January and August (a value very close to the limit of 17.4 billion tax by the State Budget), Catroga stressed that "this is a reflection than has been the uncontrolled public accounts in recent years. " The former minister argues that the IMF intervention in Portugal will be unavoidable "if the state does not adapt quickly to normal revenue expenditure."
According to Miguel Beleza, assistance from the IMF or the EFSF is, as yet, "an unlikely scenario but that could become a reality if the external debt problems worsen." "It boils down everything to convince the creditors that we are a good debt and we're not being successful in this plan," said the former Finance Minister Cavaco Silva, noting that rising interest rates and declining demand in emissions public debt "is a worrying sign."
Contacted by the DN, the Finance Ministry rejected the idea that Portugal has a problem of funding and ensured that the limit of debt issuance for 2010 was "not and will not be exceeded."
The office of Teixeira dos Santos ordered the alarmism generated around the issue and accused the PSD of having responsibilities in the increase in interest in debt issues.
"The permanent threat of the opposition and hesitation about the viability of the next budget have serious detrimental effects on the perception of foreign investors on the financial situation of the country and also on the increase in the cost of public debt," said the Finance Ministry, in a note sent to the DN.
On that note, the office of Teixeira dos Santos has also highlighted that "the implementation of the emission of public debt follows as planned, focusing on emissions from medium and long term (which are already made about 90% ), which demonstrates the confidence of investors in the Portuguese debt. "