Ahead of Friday’s meeting between Portugal’s political parties and President Aníbal Cavaco Silva and after S&P’s two notch downgrade, we thought this chart (from RBS) was worth an airing.
So, Portugal is facing coupon payments of €0.7bn in April and €2bn in June as well as redemptions of €4.3bn in April and €4.9bn in June.
How much cash is in the government coffers to meet those payments is something of an unknown – unlike Ireland, this data is not publicly available. However, in a recent interview with the Wall Street Journal, RBS notes, the head of Portugal’s debt management office put the figure at around €4bn.
But that still leaves Portugal a €1bn short (in April) and with only a couple of options to meet the shortfall, reckons RBS.
In our view the Portuguese government has the following options are
- Issue debt and get the domestic banks to buy this paper with the funding done via the ECB;
- Get bilateral loans from core EMU as a form of bridge financing before the IMF/EFSF formally have an agreement. This option is likely to prove tough but negotiable as the EU wants to avoid a credit event.
Option 1 would seriously upset the ECB president, so that means we must be looking at Option 2 — if there’s anywhere with the political authority to negotiate the loan.
Related links:
Portugal on the brink – FT Alphaville
Calculating the size of a Portugal rescue – FT Alphaville
ESM panic! Subordination, restructuring, CDS, oh my! - FT Alphaville
