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LISBON — Portugal raised euro1 billion in 12-month Treasury bills Wednesday, granting the financially troubled country some respite from recent market pressure. But the news was darkened by a top official's prediction the country was headed for a double-dip recession.
Portugal is one of the 17-nation eurozone's frailest members and is widely tipped to need a bailout as its borrowing costs rise to unsustainable levels. A senior Treasury official conceded for the first time Wednesday that a second recession in three years is likely in 2011, worsening the country's financial woes.
Investors charged Portugal an interest rate of 3.987 percent in the T-bill sale. That was up from 3.7 percent two weeks ago but lower than the 4.03 percent in January.
The government debt agency said there was demand for almost double the amount on offer.
Secretary state for the treasury Carlos Costa Pina described the terms of the debt sale as "favorable."
"From the point of view of the yield and demand, the operation went well," he told TSF radio. He said more than 60 percent of the sale went abroad.
Filipe Silva, a debt manager at Portugal's Banco Carregosa, said he was surprised by the interest rate. "Yesterday I was expecting a rate above 4 percent, in line with what was happening in the market, but it came in lower," he said.
The yield on Portuguese 10-year bonds fell slightly, to 7.39 percent, but it was the ninth straight working day at more than 7 percent — a level the government has acknowledged is unsustainable.
The minority government has staked its reputation on avoiding a bailout, saying a raft of austerity measures including tax hikes and pay cuts will put Portugal back on the path to fiscal health after racking up huge debts over the past decade of anemic growth. That economic record has alarmed investors and led them to demand higher returns for lending Portugal money.
Nevertheless, Portugal's economic difficulties are set to continue at least through the end of this year, the governor of the country's central bank said in an interview published Wednesday.
A recession in 2011 will be the price of the belt-tightening measures and fiscal adjustments, Carlos Costa told daily Jornal Economico — contradicting the government, which has forecast growth of 0.2 percent this year, but in line with analyst predictions.
Apart from financial markets, the minority government is feeling heat from trade unions angered by the austerity policies.
Commuters faced a second consecutive day of misery Wednesday as train ticket collectors walked off the job, forcing the cancellation of most rail services after engineers staged a strike the previous day. The national rail company said around 80 percent of trains were canceled.
The governing Socialist Party has won some political breathing space, however, as both the center-right opposition parties in Parliament say they won't support an attempt to bring down the government next month. A small, radical party intends to table a motion of no confidence March 10.
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