The reasons for recent changes, downgrades, can be seen
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The reviews seem, believing on what is stated in their web pages, to be based
on the time delay to get external help, given the call for a general election on June 5, 2011.
Two different views from Portuguese politicians on this.
On the one hand, the statement by the President of Republic that current Government still has enough powers to ask for external help (in case of need), and the statement by the main opposition leader that will support and honor (if they win the elections, of course) an eventual request for external help by the current Government.
On the other hand, current Government officials have been saying they do not have enough power to ask for external help.
How much of this difference in views by politicians influences ratings? Should it? Say, if all parties agree that current Government has enough powers on the ability to seek external help, but it is limited in creating new public expenditure until a new Government enters office, would that lead to a reversal in ratings? if not, then other factors must be driving such harsh cuts in ratings.
Comment by Miguel Lebre de Freitas:
ReplyDeletethe government has legitimacy to request a bailout. The problem is that it has no legitimacy to commit with a budgetary plan that was defeated in the parliament. Credibility would be however restored if the bailout request was supported by a macroeconomic plan subscribed by PSD, and hence likely to be voted in the future parliament. Failure to achieve such a commitment before the elections is obviously undermining our country's credibility. I'll post an article in Negócios on this next Tuesday
1.How much of this difference in views by politicians influences ratings? They cleary do.
ReplyDelete2.Should it? Definitely, because those different views underline the fact that although all seem apparently commited to the budget deficit targets they all want to achieve it in completely different ways and on top of it not all of them seem to propose a credible commitement.
Pedro Sousa
3. Say, if all parties agree that current Government has enough powers on the ability to seek external help, but it is limited in creating new public expenditure until a new Government enters office, would that lead to a reversal in ratings? That is not a credible expectation neither for Portuguese nor for credit ratings.
4. if not, then other factors must be driving such harsh cuts in ratings.
As a result of the above reasoning the main factors are lack of leadership at all levels of power in Portugal, general uncertainty and lack of visibility to a level not seen before. This leads to a total loss of credibility and is that is reversable only with a highly determined and professional new leadership with a majority vote by the Portuguese people and supported by the IMF/EU coalition.
Pedro Sousa