Portugal Says Bond Yields Above 10% Are a Thing of the Past

  • Centeno says it takes joint effort with ECB to avoid spikes
  • Portugal won’t promote debt renegotiation, Centeno says

Portuguese Finance Minister Mario Centeno said the time when his country’s yields were above 10 percent has passed as the European Central Bank carries out its bond-buying plan.

“I think the job of the government is to reassure markets that the commitment to leave those times behind us is very firm,” Centeno told Mark Barton in a Bloomberg Television interview in London on Tuesday.

Mario Centeno speaks during an interview in London, on Tuesday, March 1, 2016.

Photographer: Luke MacGregor/Bloomberg

The minister said it takes a joint effort of the ECB and euro-area countries to avoid spikes in bond yields. “From our side, we are pretty much committed to keeping the consolidation process, to curb the debt-over-GDP ratio,” he said.

Portugal’s 10-year bond yield in February touched the highest since the country exited its bailout program in 2014, putting pressure on Centeno, 49, and Prime Minister Antonio Costa less than three months after their minority Socialist government took office. Yields have declined since then and Centeno’s 2016 budget was approved in an initial vote in parliament last week.

The government plans to reverse state salary cuts faster than the previous administration proposed, while increasing indirect taxes. Costa says his government will be propped up in parliament by the Left Bloc, Communists and Greens, which haven’t followed the Socialists in backing European budget rules in the past.

Portugal’s 10-year yield was at 3 percent on Tuesday after touching 4.5 percent on Feb. 11, the highest since March 2014. It peaked at 18 percent in 2012 at the height of the euro region’s debt crisis.

Euro-area finance ministers on Feb. 11 told Portugal to make plans for additional budget measures in case it runs into trouble meeting its targets. Centeno reiterated on Tuesday that Portugal won’t need to adopt those measures. If necessary, the government’s “preferred course” is to make a shift from direct to indirect taxes, he said.

The government’s budget forecasts debt will decline to 127.7 percent of gross domestic product in 2016 from 128.8 percent last year. It sees the economy growing 1.8 percent this year.

Portugal won’t call for a debt renegotiation process, Centeno said. “This needs to be arranged at the European level, with a European framework, and not specifically targeting our case or other special cases.”

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