Sunday, October 23, 2016

Portugal: How a small credit Rating Agency for the Euro zone – SPIEGEL ONLINE

DBRS is primarily a term interested in the financial position of the University of Ottawa or for the credit of the canadian province of Saskatchewan. It is, therefore, almost anyone. And yet it is precisely these small credit Rating Agency based in Canada, Portugal, holds the access to the capital market is open and a second rescue package from the body. And the Euro-zone so before a new crisis is preserved.

In this Friday night, it was that time again: The DBRS announced its new rating of Portuguese government bonds. And the new rating remained the old one. In contrast to the large Rating agencies DBRS granted to Portugal, in spite of high debt, re-Investment Status. The most important message behind it: The European Central Bank (ECB) may buy by the Rating continue to be Portuguese government bonds.

Mass purchase of bonds

The agencies Standard & Poor’s, Moody’s and Fitch, the rating of Portuguese government lowered bond before five years, under the threshold of “Investment Grade”. Only the DBRS refuses to accept the papers as junk bonds. That could be plenty of regardless of if the ECB would take the DBRS is so important.

Since the beginning of 2015, the ECB in bulk buys government bonds of the Eurozone countries, to stimulate the economy. The state budgets is relieved. Because of the greater demand for bonds makes interest rates fall and the cost of debt-making.

The ECB has drawn up terms and conditions for purchases: at Least one of the four recognized Rating agencies must rate the Portuguese bonds, with the Investment-Status that is a for nearly five years, DBRS. The same applies in the case of banks ‘ bonds as collateral at the ECB, if you want to borrow money: there is a need for the Investment-Status of at least one Agency. The Rating from DBRS, Portugal on the capital market and the Portuguese banks keeps alive.

Portugal’s economy is losing momentum

the canadian Agency Would lower your rating, the interest rate on Portuguese government’s staircase and bonds; it would be more expensive for the state to Finance itself on the market – possibly too expensive. Portugal to need another bailout, the second after the 78-billion aid package from the summer of 2011. The country’s banks, which have government bonds and non-performing loans in their balance sheets, would have to apply for emergency loans from the Central Bank.

“That would be a psychological blow,” says Thomas Mayer, Ex-chief economist Deutsche Bank and now Director of the Flossbach von Storch Research Institute. “So far, Greece is sold as a sad exception. In Portugal, could indicate that the smoldering fire may at any time flare up elsewhere. Then should admit the policy is that its Euro bailout policy is working.”

In her last report from the spring of the DBRS based its Rating of Portugal, with the improved external current account balance; the country’s economy is recovering, the budget deficit is disappearing. However, the canadian Agency also warned The growth would have to accelerate finally, the state debt to decline.

change of course of the new government

half A year later, it seems as though the opposite had occurred. The economy losing momentum, said the International monetary Fund (IMF) at the end of September. After a growth of 1.5 percent in the past year, the value is likely to be this year only 1.0 percent for the coming year, the experts forecast only 1.1 percent. The exports to be less strong than expected, also because of the important customers, Angola suffers from the low Oil price.

in Addition, the socialist government for a change of course: unlike their predecessors, it relies on a less radical austerity and cuts and wage tries to tax hikes to stimulate consumption and growth. The higher spending will compensate for, for example, with a tax on soft drinks and a new tax on real estate, which are more than 600,000 euros in value.

After years of hated austerity policies may be happy with many people about the issue of lust in their government. Advocates of austerity, however, the Reforms of the past years is in danger. “It is questionable whether the government think, with their new policy worthy of remains”, says economic expert Mayer.

All of the DBRS in a strange Position: it has become a good part of the risk, to you rate.

Even if the Agency is always emphasized their independence of political pressure on them is enormous. Therefore, it is not surprising that they expressed a clear decision. In its most recent report of Friday night, the DBRS Portuguese state rating of bonds with “BBB low”. Also the Outlook, the Agency kept at “stable”. As a reason, she called the efforts of Portugal to the rules of the common Euro Currency zone. However, she also writes, and Portugal standing in front of enormous challenges, such as due to the high debt of the country and low economic growth.

It remains, therefore, only once in the strange Situation: A small, unknown rating Agency ensures the stability of the currency Union. Or the Illusion thereof.


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