Il Portugal he surprisingly received his upgrade in one fell swoop rating di two steps, from the level of Baa2 (which was a step above the Italian rating), allowing the country to move up in class A3. A pretty strong move considering that Lisbon is currently in the midst of a political problem not recently, with its prime minister Antonio Costa who had to resign after the Prosecutor's Office opened a file containing the corruption investigations in which he and also the other Antonio Costa of the Portuguese government, the minister of economic development, would be involved, according to the wiretaps carried out. Because of this, the president Marcelo Rebelo de Sousa he had to call early elections which will take place next March.
But this situation of political instability has not affected the exceptional promotion of the US agency which in this regard limited itself to saying that "so far it has been demonstrated that the Portuguese institutions allow the country to address the issue effectively" adding that if anything " These political developments could slow down progress in investments and reforms related to the Portugal PNRR."
The provision on Portugal arrived over the weekend, together with the decision on Italy, also an improvement, but to a lesser extent. Moody's limited itself to confirming Italy's rating at Baa3, the lowest investment grade, but raised its assessment on the outlook from negative to stable.
How does Portugal differ from Italy?
If you read the reports that Moody's has drawn up to explain its assessments of Italy and Portugal, the biggest difference that catches the eye is thehigh Italian debt, as well as in poor growth.
Regarding Portugal, the agency positively evaluated “a series of reforms economic and fiscal measures, private sector deleveraging and the continued strengthening of the banking system” as factors supporting debt in the short term”. Of these factors, Italy already has a low level ofprivate debt and a fort banking system, but it's on reforms economic and fiscal which evidently is not considered worthy of a better evaluation. In fact, Moody's specified regarding Italy that it had already “anticipated some difficulties in the implementation of the Pnrr. But the delays in the disbursement of the third installment of EU funds and the significant proposed revisions reveal greater weaknesses” than expected.
Portugal has been on the rise since the days of the Troika
In 2011 Portugal, one of the so-called countries Pigs (together with Italy, Greece and Spain), in the midst of the European spread crisis, is forced by the Troika (European Commission, European Central Bank and International Monetary Fund) to accept, in the face of cuts, a 78 billion bailout package of euros, the third largest bailout in history if measured as a percentage of GDP.
A necessary loan: at that moment the Portuguese GDP was in free fall, unemployment, particularly among young people, was galloping and so was the public deficit, which reached up to 10 percent. The situation was so serious that it is estimated that half a million people, mostly young people, left the country over the next three years, the largest mass emigration in Portugal's 50-year history.
The issue of debt compared in Italy and Portugal
Now Portugal's situation has definitely changed and Moody's notes that “the pandemic shock has only temporarily interrupted the reduction of the debt burden. A robust growth e budgets essentially balanced cause the weight of debt continues to decline at one of the fastest paces among advanced economies, albeit from high levels.” However, regarding Italy, the US agency says that “debt levels will remain high. Reducing the deficit in the coming years will be essential for the future debt trajectory given the differential between nominal growth and interest rates will return negative in 2025, requiring Italy to run a primary surplus to stabilize the debt”.
