The central bank warns that Portugal may be facing a deterioration of financing conditions in international markets and, once again, insists on the need for the country to reduce public debt.
The Bank of Portugal warned of possible worsening financing conditions in international markets, in view of the rise in inflation, and the need to tighten the European Central Bank’s (ECB) monetary policy. Mário Centeno’s warning serves both the government, which will have to improve public accounts, and the banks, especially those most exposed to government debt.
The governor had already stressed last Friday that the next government has “two to three years” to correct the effort made during the Covid-19 pandemic in terms of debt and expenditure.
Now, in the Financial Stability Report published on Monday, the central bank once again issued a warning: we may see “changes in financing conditions in international markets,” and this could have an impact on “the cost of financing the sovereign and other institutional sectors.”
Mário Centeno’s warning serves not only the government, but also the banks.
“Market risk materialisation stemming from an increase in long-term interest rates, with a negative impact on the value of financial assets in the portfolio, most notably government debt,” says the central bank, who points out, however, that banks have reduced their exposure to public debt (which was a factor of enormous pressure in the debt crisis in 2011).