Portugal kicks debt can further down the road

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Portugal kicks debt can further down the road

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Portugal has bought itself a bit of breathing space by carrying out a swap of some of its government bonds.

They were due to be paid back next year, which would have been difficult for Lisbon to do.

Instead, on Wednesday, it exchanged the bonds for ones which will mature in 2015.

That gives more time for Lisbon to make the cuts necessary to reduce its debt and hopefully get the economy growing again.

Trader Pedro Oliveira with Carregosa Bank believes it was a first step towards the country returning to financing normality: “The fact that more than a third of the investors holding these bonds took part in the swap shows they are content to assume the risk of holding Portuguese debt for two more years. That is seen as a positive for Portugal’s return to the market.”

Portugal has been not been able to borrow on the bond markets to service its government debt since it had to ask the European Union and the International Monetary Fund for a 78 billion euro bailout in April last year.

Portuguese banks, insurers and pension funds are the main holders of the country’s debt, with international investors still shying away.