“With Portuguese bond yields still in the double digits, this summer we will have a discussion about the need for a new Portuguese program,” Mayer said today during an interview on “Surveillance Midday” with Tom Keene. The current plan is only funded through September 2013, and the International Monetary Fund “cannot disburse if a 12-month funding outlook is not guaranteed,” he said.
Portugal’s 10-year bond yielded 13.65 percent at 4:15 p.m. in New York, down from the euro-era record of 18.29 percent it reached on Jan. 31. The yield was higher than the 2011 average of 10.17 percent.
The Iberian nation is raising taxes and cutting spending as it fights to meet the terms of its 78 billion-euro aid plan from the European Union and the International Monetary Fund after it followed Ireland and Greece in seeking a bailout last year.
Structural deficits in Italy and Spain, where yields have also surged, will decline between 2 percent to 2.5 percent by the end of this year because of austerity measures, Mayer said. While the adjustments will probably produce a “significant” recession in the first half of 2012, the hope and expectation is that “these reforms will finally pay off and stabilize these economies at the end of the year,” he said.
“One should acknowledge that the new Spanish and the new Italian governments have really done what the textbook would prescribe for economies that have been struggling in a common currency area,” he said.
Vitor Constancio, ECB vice president and former Bank of Portugal governor, said March 8 that Portuguese austerity measures were on track and Greece’s debt swap would not need to be repeated. The following day, German Finance Minister Wolfgang Schaeuble called Greece a “completely unique case.”
A new bailout would “resemble the discussion we had about Greece in the summer of last year,” Mayer said.
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