LISBON Dec 3 Bailed-out Portugal needs to issue
"reasonable amounts of bonds" with maturities longer than three
years for it to qualify for the European Central Bank's bond
purchases programme, an ECB Executive Board member told a
In an interview published in Tuesday's edition of the Jornal
de Negocios, Joerg Asmussen, one of the ECB's key negotiators
for a closer integration of the euro zone, said Portugal took "a
significant step forward" with the issuance of a three-year bond
as part of a bond swap in October, but that was "not enough".
Portugal replaced almost 3.8 billion euros ($4.97 billion)
in bonds maturing in 2013 with three-year debt in its first step
toward a return to bond markets since it sought a bailout in
"The majority of the bonds were bought by domestic
investors, which means that international investors have not yet
returned to the country," he told Negocios, adding that "one
three-year bond issuance is not sufficient" in any case.
Asked what the country needed to do to gain access to the
yet-to-be-activated Outright Monetary Transactions (OMT)
bond-buying programme, he said: "I would say that it will be
necessary to issue reasonable amounts of bonds with longer
maturities ... along the yield curve."
On Sept. 6, ECB chief Mario Draghi sought to calm markets'
unease about the spreading euro zone crisis by unveiling the new
bond-buying programme, allowing for potentially unlimited
interventions for ailing states that have market access.
Asmussen praised Portugal's "remarkable" progress in its
fiscal adjustment under the terms of the bailout and urged it to
keep pressing ahead with the programme. He saw the goals of the
programme, including budget deficit cuts and the return to the
bond markets in the second half of next year, as achievable
despite a steep economic recession in the country.
"Doing everything possible to meet the agreed objectives
would send a very important signal to the markets, and Portugal
has to re-enter the financial markets in the second half of next
year. It really should meet its budgetary objectives," he said.
Asked whether he saw risks of the slump in GDP and
disposable income compromising the objective of reducing the
debt, Asmussen said: "No, I do not."
He said a 1 percent contraction in 2013 was still a likely
central scenario for the ECB even though the Bank of Portugal
recently had revised its forecast to a 1.6 percent drop.
Portugal's economy, which is expected to slump 3 percent this
year, will enter its third year of recession in 2013.
He saw Portugal's public debt as sustainable if the
programme is fully implemented. De-leveraging in all sectors of
the Portuguese economy is proceeding in an orderly fashion and
there is no credit crisis, he said, adding that measures like
setting up a development bank could improve access to credit.
He also saw no shortage of capital in Portugal's banks.
The ECB policymaker said he "would not dispute that fiscal
consolidation in the short term is negative for growth", but saw
no alternative and said the consolidation has to be done
quickly, as the example of countries like Latvia has shown.
"If you have identified what needs to be done, the best
thing is to do it quickly and not drag out the adjustment
process unnecessarily, as at a certain point in time reform
fatigue will set in and confidence will not return quickly."
Asmussen said one of the risks for Portugal was the dynamics
of exports that hinged on the global economic situation, but he
was modestly upbeat about these prospects.
"I believe that we in Europe have made significant progress
in the last year, and I am assuming that the United States will
succeed in tackling the fiscal cliff and that China will avoid a
hard landing. And I am not as pessimistic as others. I think
that is the main reason for the difference," he said.
He also said he did not expect any debt defaults in the euro
He reiterated his view that the European banking union, and
its key element - common supervision - will not be fully
operational before the beginning of 2014. But he said creating a
common European deposit insurance scheme was not a priority.
"That is not something I see happening in the short term,"