Tag Archives: public debt

EU-issued debt exceeds 5% of the bloc’s GDP

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Debt issued by the European Union on behalf of its Member States has almost doubled since 2020 and now exceeds 5% of the bloc’s gross domestic product. The figures are cited by the European Fiscal Board.

Joint issuance allows the Union to raise funding associated with its Member States. The increase recorded since 2020 highlights the growing use of this instrument within the European financial framework.

The share of GDP provides a measure of the scale of the debt relative to the Union’s economy. The report places this issue at the centre of discussions on European public finances and the management of shared commitments.

Follow budget data and developments in the European Union’s finances.

Portuguese government bond yields rise across the curve

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Portuguese sovereign debt yields rose at the two-, five- and 10-year maturities. The movement therefore covered short-, medium- and long-term benchmarks, signalling a broad increase in the yields demanded by the market.

This development did not occur in isolation. Spain, Greece and Italy recorded similar movements, pointing to a region-wide adjustment in southern European government debt markets.

Rates traded on the secondary market serve as an indicator of governments’ financing conditions and investor sentiment. Daily movements should, however, be interpreted within the broader context of expectations regarding inflation, monetary policy and economic growth.

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Fitch upgrades Portugal’s rating to “A” due to fiscal strength

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The Fitch agency highlights consistent primary surpluses, debt reduction, and a debt profile centered on fixed rates as decisive factors for improving the country’s credit rating.

The financial rating agency Fitch recently announced the upgrade of Portugal’s credit rating, which rose from “A-” to “A.” This decision reflects growing confidence in the country’s ability to maintain a solid fiscal trajectory, even amid international economic uncertainty. The agency stressed that consistent management of public accounts and the gradual reduction of debt were key factors in the rating upgrade.

According to Fitch, the positive performance is largely due to the successive primary surpluses achieved by Portugal. These results demonstrate an ongoing effort to control public spending and responsibly manage state finances. In addition, the debt structure now shows a more robust profile, with extended maturities and a higher percentage of debt issued at fixed interest rates, reducing exposure to market fluctuations.

Another highlighted element was Portugal’s ability to face the challenges posed by low inflation and the economic slowdown in Europe. Although GDP growth may moderate in the coming years, Fitch believes that budgetary discipline and the commitment to financial stability will remain factors of resilience. The agency also noted that the country has benefited from effective fiscal containment policies and the sound implementation of European funds, such as the Recovery and Resilience Plan (RRP).

This rating upgrade is positive news for the Portuguese economy, as it improves risk perception among international investors. In practice, it may translate into lower financing costs for the state and national companies, strengthening the competitiveness of the economy. The rating increase also sends a signal of confidence to markets, showing that Portugal is on a sustainable path of public debt management and strengthening its external financial position.

Public Debt Continues on a Reduction Path

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According to the Bank of Portugal’s Financial Stability Report (November 2024), the public debt ratio fell from 132.5% in 2014 to 97.9% in 2023, with the reduction continuing in the third quarter of 2024.
This positive development contributes to Portugal’s credibility in the markets, reflected in the improvement in debt return rates and the maintenance of its category A credit rating by four international agencies.
However, public debt remains high, and risks associated with external shocks or the economic cycle demand prudence and a commitment to consolidating a sustained reduction path.

CFP warns of future risks despite surplus in 2024

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The Public Finance Council (CFP) emphasizes that, despite a fiscal surplus of 0.7% of GDP in 2024, fiscal policy remained expansionary and countercyclical, which could jeopardize the sustainability of public finances in the future.
The positive balance was driven largely by the exceptional performance of the Pension Funds and the Regional and Local Administration.
However, the deterioration of the Central Administration’s balance, which recorded a deficit of 1.5% of GDP, and the sharp growth in personnel and social benefit spending indicate lasting costs that could put pressure on the budget. Public revenue, while robust, grew unevenly, particularly for ICMS (Tax on Goods and Services) and IRPJ (Corporate Income Tax), and the tax burden reached 35.6% of GDP.
The CFP warns that, in 2026, the country is expected to return to deficits—estimated at 1% of GDP—and public debt is unlikely to resume its downward trend, jeopardizing compliance with European fiscal targets.

Treasury Issues Retail Bonds Linked to 6-Month Euribor

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The National Treasury announced the launch of new *Treasury’s Retail Verbrief Bonds* (OTRV), a return on debt issuances aimed at individual investors, with maturities in six years and a rate indexed to the 6-month Selic rate plus a premium of 0.25%. This offering represents an alternative to savings certificates, increasing competition in fixed-income instruments available to the public.

The initiative arose as part of a strategy to diversify sources of financing and attract small savers, at a time when the European Central Bank (ECB) is progressively reducing interest rates. The Institute of Financial Management and Public Debt (IGCP) will fulfill, by the end of May, approximately 47% of the annual issuance plan, which suggests continuity in the capture of national savings.

For investors, the proposal is attractive given the expectation that the Selic rate will remain above 2% for 6 months, offering a return adjusted to sovereign credit risk. Even so, caution is advised, since European money market conditions may evolve, affecting the cost of financing for the State.

This operation reveals changes in the affiliation of domestic investors, who now seem to prefer instruments with variable rates and shorter terms, in contrast to traditional savings accounts linked to the State.