Portugal

ECB takes off hair shirt; puts on kid gloves

8 Jul 2016

The euro zone central bank's vice-president hinted that restrictive Brussels state aid rules get in the way of sorting out banks. Even if that reflects reality, it jars with the ECB's mission. Wavering over state aid makes the laudable goal of banking union harder to achieve.

Spanish politicians leave demographic bomb ticking

31 May 2016

While economic activity has picked up, the Spanish population is ageing faster than the EU average. Consensus and long-term planning are needed to tackle the burden this will place on the welfare system and growth prospects. The current polarisation in politics stands in the way.

Euro zone rules need more carrot, less stick

20 May 2016

Spain, Portugal and Italy are getting free passes to break Europe’s fiscal rules. Political calculations explain why, but even if penalties were enforced they’d be self-defeating. Instead of punishing sinners, the single currency needs simpler rules that reward those who comply.

EU budget delinquents have the upper hand

26 Apr 2016

The European Commission is considering penalising Spain and Portugal for flouting budget rules designed to underpin the euro. Doing so would risk a political backlash. Letting them off sends a signal EU budget rules are toothless. It hardly helps that the rulebook is so complex. 

Lisbon supplies key to unlock Caixa’s BPI riddle

18 Apr 2016

The Spanish bank has launched a second offer for its Portuguese peer at a lower price.  Angolan investor Isabel dos Santos used a voting cap to block the last one, but the state may now scrap this. Despite a hit to capital, Caixa now has a light at the end of the tunnel.

CaixaBank’s BPI saga has potential silver lining

11 Apr 2016

The Spanish bank has reached a deal with Angolan investor Isabel dos Santos that could see BPI cut its exposure to the African state. It’s the key to a Caixa bid for all of BPI. Even better, the Spaniards may be able to take control of their Portuguese rival for a lower price.

Portugal can gain if it loses Novo Banco battle

5 Apr 2016

Bondholders are suing Lisbon’s central bank, arguing losses imposed on the stricken lender were arbitrary. Losing the case would complicate Novo Banco’s turnaround. But enforcing the principle that governments should use bail-ins fairly would help all banks, even in Portugal.

Caixabank’s BPI ambitions require African solution

2 Mar 2016

The Spanish lender is reportedly in talks to acquire Angolan investor Isabel dos Santos’ stake in the Portuguese bank. But first it needs BPI to find a way to cut exposure to Angola. Otherwise Caixa’s efforts to control BPI will be no more successful than previous attempts. 

Portugal squall maps new territory in euro crisis

24 Feb 2016

The state’s left-wing government has reassured bond markets by passing an emergency budget and buying back debt. Yet the recent spike in bond yields shows Portugal remains vulnerable to high debt and low growth. And it shows that the calm from the ECB’s bond-buying can be broken.

Portugal adds CDS eyesore to bond market heresy

16 Feb 2016

Lisbon’s shock decision to bail in Novo Banco debt won’t trigger its credit default swaps, lawyers have decided. Jumping CDS spreads partly explain the current panic over banks. That’s bad - if they don’t protect against defaults, they’re less reliable as market gauges or hedges.

Portugal’s tomfoolery tests uneasy euro calm

11 Feb 2016

Lisbon’s new government is unwinding reforms, and gouging bank investors. Its bond yields are rising on concern the government may fail, or the country be thrown off the ECB’s bond-buying scheme. Portugal’s debt has further to fall, but its woes are not infecting other crisis countries. 

Portugal’s crazy bail-in leaves CDS gurus stumped

15 Jan 2016

The International Swaps and Derivatives Association can’t decide if the bail-in of Novo Banco should trigger credit swaps. A “No” would undermine new contracts designed for bank resolution. But a “Yes” would be a bad precedent. It muddies the picture for future resolutions.

Portugal’s creditor-mugging may prompt EU copycats

7 Jan 2016

Lisbon’s decision to trash bondholders of Novo Banco rode roughshod over creditors’ claims for equal treatment. The region’s new resolution regime is meant to be clearer. Yet it too leaves room for more bad behaviour. 

Portugal finds bad solution for BES good bank

30 Dec 2015

Lisbon has recapitalised lender Novo Banco by moving bonds back to failed Banco Espirito Santo, from which it was carved out. The move clears the way for Novo’s privatisation, but highlights the unpredictability of bank resolutions, and does nothing for Portugal’s investibility. 

Portugal pays high price for past banking sins

21 Dec 2015

Its taxpayers will stump up 3 bln euros, or 1.7 pct of GDP, to wind down troubled lender Banif. The move follows a flawed 2013 rescue. The new plan resolves the issue. But it also shows Portugal’s economic weakness and the difficulty of making creditors pay for bank failures. 

Portugal’s ropey bank rescue comes home to roost

16 Nov 2015

The “good bank” part of bust lender BES needs another 1.4 bln euros, EU regulators say. If it ends up being sold cheaply, fellow banks that part-financed its rescue could suffer. Had Lisbon taken a tougher line with senior creditors last year, it would be in less of a mess.

Cutting Portugal’s lifeline would be act of mercy

11 Nov 2015

The state’s access to European Central Bank bond-buying hangs on the opinion of Canadian rating firm DBRS. A downgrade could make it ineligible, punishing Portuguese bonds. A messy compromise could hurt ECB independence. Tough love might actually help.

Portugal dangles between stasis and crisis

9 Nov 2015

A group of left-wing parties could replace Portugal’s minority government after a key vote on Nov. 10. This communist-backed coalition could repeal reforms and make the country ineligible for ECB bond-buying. Or it may prove weak, in which case a damaging stalemate could follow.

Portugal may be a test for centripetal politics

21 Oct 2015

The opposition Socialists are willing to team up with parties further to the left in order to take power. Markets may have been naive to underestimate politicians’ ambitions. Greece sends a reassuring message that power can bring even idealist firebrands closer to the centre.  

Portugal vote shows scars of euro-crisis policies

5 Oct 2015

A weak poll victory may force incumbent PM Pedro Passos Coelho into a centre-right minority coalition. His reforms and fiscal austerity – following the euro zone template – lost votes. But Portugal is far from a political crisis. The Greek mess looks increasingly exceptional.