Business

Portugal defiant as borrowing costs rise

A Portuguese financial broker in Lisbon talks on the phone
Image caption Portugal raised more than 1bn euros on the bond markets last month

Portugal has denied it will struggle to raise capital from international investors after yields on Portuguese government debt hit record highs.

"There are no reasons to think that Portugal does not have conditions to keep tapping the markets," said Cabinet Minister Pedro Silva Pereira.

Earlier, the European Central Bank (ECB) intervened to buy Portugal's debt after yields rose sharply.

The rise in yields renewed concerns Portugal may need financial assistance.

'Speculative moves'

In early trading, yields on Portuguese 10-year bonds rose to almost 7.6%, their highest since the introduction of the euro.

The ECB acted swiftly to prevent yields moving higher by buying up bonds in the secondary market. As a result of its actions, yields fell to below 7.2%.

Mr Pereira attributed the earlier rise in yields to fresh concerns about government debt levels across Europe, rather than any specific fears about Portugal.

"This has to do with sovereign debt markets, and not only in relation to Portugal, but rates at the European level - all subject to speculative moves attacking the euro."

Last month, Portugal raised 1.25bn euros (£1.1bn; $1.7bn) in an auction of four and 10-year bonds. The yield - the interest rate Portugal agreed to pay to borrow funds - was an average 6.7%.

Property crash

Worries about government debt levels had subsided in recent weeks, following widespread speculation at the end of last year that Portugal may need to seek some sort of bail-out from the EU.

This followed an 85bn-euro bail-out package for the Irish Republic. Greece was also bailed out last summer to tune of 110bn euros.

Lisbon has long argued its situation is different to Greece and the Irish Republic because its deficit and debt are lower. It says it has not suffered a crash in property prices similar to the Republic.

However, some analysts still believe the country will need to seek funding help.

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