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Zapatero’s socialists defeated by People’s party in regional elections

http://distributedresearch.net/blog/2011/05/23/zapateros-socialists-defeated-by-peoples-party-in-regional-elections

Results seen as protest vote against Spain’s José Luis Rodríguez Zapatero’s handling of the Spanish economy since 2008This article titled “Zapatero’s socialists defeated by People’s party in regional elections” was written by Giles Tremlett in Madrid, for The Guardian on Monday 23rd May 2011 17.28 UTCThe socialist party of Spanish prime minister José Luis Rodríguez Zapatero is licking its wounds after defeat by the conservative opposition People’s party (PP) in municipal and regional elections.In what was widely seen as a protest vote against Zapatero himself and his handling of Spain’s economy, his party lost control of key city halls in places such as Barcelona and Seville while the PP took control of most of the country’s powerful regional governments.The central Castilla La Mancha region, Aragon and the Balearic islands all ejected socialist administrations.“We are aware of the situation that had distanced people from our party and caused them to criticise us with their vote or abstention,” party spokesman José Blanco said.The socialist drubbing came just 10 months before a general election and appeared to clear the way for PP leader Mariano Rajoy to take possession of the prime minister’s Moncloa Palace residence on his third attempt.The voting coincided with the eruption of numerous popular protests against established politics across Spain, with demonstrators camping out in Madrid’s Puerta del Sol and in dozens of other cities. A backdrop of 21% unemployment and sluggish growth has spread pessimism throughout Spain as the country struggles to find its feet after the 2008 crash.The socialists lost one in five voters on Sunday, compared to the municipal elections of 2007. Not all those votes were picked up by other mainstream parties, however, and the number of spoilt ballots doubled. But overall turnout was a high 66%.Zapatero is blamed by some for mismanaging a debt crisis that saw Spain on the edge of disaster last year. Others dislike the austerity measures he has since imposed in order to avoid a Portuguese- or Greek-style debacle in Spain.His popularity has plunged since a U-turn last year saw him bring in a strict deficit-cutting plan, which he has pledged to stick to, along with labour and pensions reforms.Markets reacted nervously to the poll result on Monday, pushing up the price of Spanish bonds and pushing down Spanish share prices.The PP urged Zapatero to call a snap general election. “Zapatero and the whole socialist party must reflect on what has happened. Spain cannot waste another year like this,” said the party’s general secretary María Dolores de Cospedal.The one socialist leader to have survived Sunday’s debacle, the head of the Extramadura regional government Guillermo Fernández, also suggested that an early general election might be considered.The socialists must first choose a new leader to take them into those elections, with deputy prime minister Alfredo Pérez Rubalcaba and defence minister Carme Chacón as favourites.Party officials said that a timetable for electing the new leader would be set on Saturday.With a general election due in Portugal on 5 June, and with opinion polls showing that socialist prime minister José Sócrates will struggle to hang on to power, the rolling back of leftwing politics that has already taken place in northern Europe now appears to have moved south. guardian.co.uk © Guardian News & Media Limited 2010Published via the Guardian News Feed plugin for WordPress.Thanks for subscribing to Andy Roberts blogZapatero’s socialists defeated by People’s party in regional electionsRelated posts:Blair to go, now give back the Labour PartyCatalan independence boost after Barcelona voteZapatero says Spain safe from bailout
May 23 2011, 12:35pm | Comments »
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Portuguese learn price of €78bn debt bailout

http://distributedresearch.net/blog/2011/05/04/portuguese-learn-price-of-e78bn-debt-bailout

Health and education spending in Portugal to be cut by €745m, state pensions reduced and major building projects axed

This article titled “Portuguese learn price of €78bn debt bailout” was written by Giles Tremlett, for The Guardian on Wednesday 4th May 2011 15.20 UTC

Portugal woke up to the price of its €78bn (£70bn) bailout on Wednesday as new airports and high-speed rail lines were sacrificed in a package of austerity measures and the government pledged to freeze pensions and shrink the civil service. Lisbon’s new international airport, already on hold, and the building of a high-speed rail link between Lisbon and Oporto will now be put back until after 2013, according to state news agency Lusa. Health and education spending will be cut by €745m, civil service pay and pensions will be frozen, and people on state pensions above €1,500 a month will have them reduced. Civil service staffing is to be squeezed by 1% a year in central government, while regional administrations and town halls will be told to shed 2% of their employees annually. Portugal’s banks will take up to €12bn of the bailout funds to rebuild their capital ratios, according to reports. The banks would have to raise their core tier one capital ratio – a gauge of higher quality capital that mainly comprises equity and retained earnings – to 9% at the end of this year and to 10% by the end of 2012, Reuters said. The country will also carry out a fire sale of the nationalised Banco Português de Negócios (BPN) bank. “The authorities are launching a process to sell BPN on an accelerated schedule and without a minimum price,” according to a memorandum of understanding seen by the Guardian, which added that the sale should be finished in July. Portugal is expected to reduce public spending by 3.4% of its GDP this year and raise an extra 1.7% of GDP by raising taxes on cars, tobacco and electricity and getting rid of income and corporation tax loopholes. A detailed investigation of public-private partnerships (PPPs), which have been used for building hospitals, roads and rail lines, will be carried out to see if they are hiding extra government debt. New PPP projects will be suspended. José Sócrates, Portugal’s caretaker prime minister, announced the areas that would remain untouched when he explained the bailout during a television address to the nation on Tuesday night. These included pensions for the worse-off and the retirement age. But he failed to reveal what austerity measures came with the bailout package, beyond saying they would be similar to those rejected by parliament in March. The March defeat brought down his minority socialist government and a snap election was called for 5 June. Polls show the opposition Social Democrat Party (PSD), which rejected the March austerity package, may win that vote. Representatives of the International Monetary Fund, the European Union and the European Central Bank met Social Democrat leaders on Wednesday morning to seek their backing for the plan. “The PSD will give its opinion on what it has read and heard late today or early tomorrow,” said Carlos Moedas, the party’s economics advisor, after the meeting. Social Democrat leaders had already indicated they might change elements of any bailout-related austerity package if they were elected to government, although always with the aim of hitting this year’s target of reducing the budget deficit to 5.9% of GDP. The IMF said: “We have said from the start that it is important that any agreement have multi-party support and we shall continue in our efforts with opposition parties to show that this is the case.” Portugal managed to raise €1.12bn euros in three-month treasury bills today with demand almost doubling the offer, but investors insisted on a 4.65% interest rate – up from 4.05% two weeks ago. Jonathan Loynes, chief European economist at Capital Economics in London, said the bailout might not be enough to stave off restructuring: “It won’t put an end to speculation that – along with Greece and perhaps others – it will sooner or later need to undertake some form of debt restructuring.”

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Related posts:Ireland forced into new £21bn bailout by debt crisis Portugal bailout fears rise as credit rating cut Portugal’s PM calls on EU for bailout
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May 4 2011, 10:30am | Comments »
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Spain staves off bailout – for now

http://distributedresearch.net/blog/2011/04/08/spain-staves-off-bailout-for-now

As its neighbour Portugal succumbs to a bailout, Spain insists that it won’t follow despite holding €75bn of Portuguese debt

This article titled “Spain staves off bailout – for now” was written by Giles Tremlett, for The Guardian on Thursday 7th April 2011 19.43 UTC Spanish store fronts, jostling for space along a single block in Lisbon’s João II street, are a sign of just how deeply Spain – which accounts for a third of all Portuguese debt held in foreign banks – is linked to its neighbour. Spain’s two global banks, Santander and BBVA, both have branches on this block, along with another bank, a hotel, a travel agency, a dentistry chain, a pizza restaurant and a supermarket – all of them Spanish businesses. Some 8.5% of Spain’s exports are sent across its western border, meaning that Portuguese austerity measures and an expected return to recession will be also be felt there. But Spanish officials who have watched their bond yields improve even as Portugal headed towards a bailout insist there is no danger of it becoming the next eurozone domino to fall. “(The risk of contagion) is absolutely ruled out … it has been some time since the markets have known that our economy is much more competitive,” Elena Salgado, the finance minister, told the SER radio station. Spanish banks hold around €75bn (£65bn) of Portuguese debt, though only about 30% of this is public debt. Spain had about €25bn in foreign direct investment in Portugal in 2009. The prime minister, José Luis Rodríguez Zapatero, who has said he will not stand for a third term next year, told the Guardian last week that his socialist government would continue to meet its deficit targets. He said it would also keep introducing reforms to boost the current timid rate of growth and start bringing down a startling 20% unemployment rate. Salgado said on Wednesday that 2011 growth would be 1.3%. Spain’s economy is bigger than those of Portugal, Ireland and Greece put together. A bailout there could have disastrous consequences for the eurozone. “Portugal’s bailout request puts the likes of Spain under the spotlight, but we are of the opinion that Spain will not follow due to its improving fiscal situation and recovering economy,” Credit Agricole analysts said in a note to clients .

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April 8 2011, 5:33am | Comments »
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Portugal teeters on brink of bailout

http://distributedresearch.net/blog/2011/03/24/portugal-teeters-on-brink-of-bailout

For Portugal, a bailout request is now seen as inevitable following the Portuguese prime minister’s resignation after his failure to push through another round of austerity measures

This article titled “Portugal teeters on brink of bailout” was written by Graeme Wearden, for guardian.co.uk on Thursday 24th March 2011 13.09 UTC City experts fear Portugal will be soon be forced to apply for a bailout package worth up to €70bn (£60bn), following the Lisbon government’s failure to push through its austerity measures on Wednesday. Portugal is teetering on the brink of becoming the third member of the eurozone to seek assistance from the EU – and as with Greece and Ireland the International Monetary Fund would probably also be involved. Prime minister José Sócrates’s resignation on Wednesday night has left the country in political limbo, and piled extra pressure on European leaders who are gathering at a summit in Brussels on Thursday. “The resignation of the Portuguese prime minister adds a political crisis to a fiscal crisis, and brings a bailout a step closer,” said Kevin Dunning at the Economist Intelligence Unit. Sócrates quit after opposition parties voted down his austerity measures. European commission president José Manuel Barroso quickly warned, though, that the country must stick to the latest reforms announced this month. Britain could be forced to contribute more than £3bn to a Portugal bailout package, according to the Open Europe thinktank. It claimed on Thursday that the UK’s share of any rescue package would be between €810m and €3.7bn, via the commission’s €440bn bailout fund. “Portugal will inevitably ask for a bailout,” said Open Europe’s Raoul Ruparel. “But the cases of Ireland and Greece clearly illustrate that the EU’s strategy – to throw good money after bad – is failing. Rather than simply taking a bailout, it would be better in the long run for Portugal to restructure its debt now,” Ruparel added. Sócrates had proposed a wide-ranging plan of tax rises and spending cuts, in an attempt to cut Portugal’s deficit and retain market confidence. The yields on Portuguese government debt has reached record highs, with the 10-year bond trading hitting 7.6% – widely seen as an unsustainably high cost of borrowing. Now that the austerity programme has been rejected, economists also believe Portugal must ask for help. “Portugal moved another step closer to needing a bailout yesterday,” said Gary Jenkins, the head of fixed interest research at Evolution Securities. “Even with complete political harmony it was always going to be difficult for Portugal to persuade investors to continue to fund them and thus yields are likely to rise further from what has already been described as unsustainable levels by Portuguese officials.” George Osborne concerned The chancellor, George Osborne, tried to calm nerves, saying talk of a bailout was “speculation” at this stage, but conceded that the situation was unsettling. “What is happening in Portugal is certainly concerning. It reminds us that we are not alone in facing these challenges,” said Osborne. Portugal needs to refinance £4bn of bonds in April. It has also emerged that the new European stability mechanism – to which Britain will not sign up – will not be signed off at the two-day meeting in Brussels, as had been planned. Instead, the deadline for a final agreement has been pushed back to the end of June. “When I started working in the City I was often told to follow the old ‘under-promise and over-deliver’ formula; the EU seems to be going for the opposite strategy when it comes to dealing with the crisis,” Jenkins added. Fears that the European debt crisis may spread to Madrid were heightened on Thursday morning, when Moody’s downgraded most of the Spanish banking sector. Holger Schmieding, chief economist at Berenberg Bank, argued that Spain was in much better shape than its Iberian neighbour. “You can never say anyone is safe in these times. There is always the danger of a run on a country. But Spain is in a significantly better position than Portugal, which in every likelihood will need a bailout now,” Schmieding told Bloomberg TV. Britain’s inclusion in the €440bn temporary stabilisation mechanism is controversial because Alistair Darling signed up for the plan on 10 May 2010 – during the hiatus between the general election and the formation of the coalition government. Osborne, who replaced Darling as chancellor later that week, has insisted that he would have taken a different decision. Britain is lending a total of £7bn to Ireland, partly through the European rescue and partly as a bilateral loan. Osborne has said that he expects Britain will make a profit on the agreement, as long as the money is eventually repaid.

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March 24 2011, 11:02am | Comments »
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Portugal bailout fears rise as credit rating cut

http://distributedresearch.net/blog/2011/03/16/portugal-bailout-fears-rise-as-credit-rating-cut

Portugal is being lined up as the next victim for the IMF treatment. So far the only country that has managed to resist has been Iceland.

This article titled “Portugal bailout fears rise as credit rating cut” was written by Graeme Wearden, for guardian.co.uk on Wednesday 16th March 2011 10.11 UTC City analysts warned on Wednesday that Portugal is moving closer to the brink of seeking financial help, after Moody’s cut the country’s credit rating by two notches. The ratings agency concluded a review of Europe’s weaker economies by warning that Portugal’s growth prospects are poor, and questioning whether it can keep borrowing from the financial markets for much longer. The downgrade, from A1 to A3, leaves Portugal with Moody’s seventh highest credit rating, just four notches above “junk”. It brings Moody’s into line with the other ratings agencies, and piles more pressures on Portugal ahead of its next debt auction. Moody’s said that Portugal faces “subdued growth prospects and productivity gains” over the next few years until its structural reforms kick in. It also warned that the Lisbon government could fail to implement its austerity measures, which are opposed by other political parties, and might also have to pump more money into its banking system. It also maintained a negative outlook on Portugal’s sovereign debt, saying there is more chance of a further downgrade than an upgrade in the next two years. Portugal’s treasury secretary, Carlos Pina, said that Moody’s decision was “hasty”. Arturo de Frias, head of banks research at Evolution Securities, warned that Portugal’s banks are still relying on €42bn (£36.5bn) of lending from the European Central Bank. “The Portuguese government has given an April 30 deadline to the banks to strengthen their capital,” said de Frias. “It seems increasingly likely that they will fail to do so, and the government will eventually end up having to provide capital. This might trigger the sovereign bailout,” he added, Challenging path ahead Portugal is resisting pressure to seek a bailout from the European Financial Stability Fund (EFSF), insisting it can cut its deficit and reduce its borrowing needs independently. Last week it announced a new swathe of cutbacks and reforms in an effort to boost market confidence. It is scheduled to auction up to €1bn of 12-month debt on Wednesday morning. But the interest rates on Portugal’s debt remain at levels that are widely seen as unsustainable. The yield on five-year Portuguese bonds rose to almost 7.5% on Wednesday morning. “The cost of market funding is likely to remain high until the deficit has been reduced to a sustainable level and the prospects for economic growth have improved,” Moody’s warned. “If the government seeks funds from the EFSF rather than capital markets, Portugal would likely gain access to liquidity at lower cost than it currently faces in the capital markets and limit some of the potential increase in its debt servicing costs, but the path to regaining market access at favourable terms would remain challenging,” Moody’s cautioned. Portugal’s opposition parties have blasted the latest austerity package, and vowed to oppose it. Jane Foley, senior currency strategist at Rabobank, warned that this could thwart the Lisbon government’s efforts to avert the need for a bailout.

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March 16 2011, 6:01am | Comments »

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