Moody’s. Political deadlock negative for Portugal’s credit
The rating agency Moody’s said this Monday that the “lead” of the 2022 State Budget creates a political impasse that is negative for Portugal’s credit and increases uncertainty about the investments of European funds.
In an analysis released today, Moody’s considers, given data that indicate that the anticipated new legislation will be inconclusive, that this uncertainty is “negative for the credit” of Portugal and that the possible political impasse creates risks of the Government not meeting the agreed targets, which may impede the disbursement of EU recovery plan funds.
The rating agency recalls that these European funds are “crucial for Portugal’s economic growth”.
If any party gets a majority in parliament on legislative changes, Moody’s says it would be positive for Portugal’s credit rating as it would remove the risk of political uncertainty.
However, he warns, if a new government wants to redefine the use of European funds, this implies new approval by the European Council and will lead to delays achieved in financial disbursements.
Until there is a new budget, the year 2022 will run with the 2021 budget in effect (in twelfths), which Moody’s says is not problematic for the deficit target, as measures to mitigate the impact of the pandemic of covid-19 (which have an impact on expenditure) have been phased out.
Last week, the Government’s proposal for the 2022 State Budget was ‘failed’ with votes against the PSD, BE, PCP, CDS-PP, PEV, Chega and IL, and new legislation is now expected to follow.
The President of the Republic, Marcelo Rebelo de Sousa, will speak to the country on Thursday, after listening to the Council of State, about the dissolution of the Republic and the revision schedule.
Marcelo Rebelo de Sousa has already confirmed the parties in Belém on this topic. Seven of the nine parties with parliamentary representation pointed to the January 16 data as the most designated to carry out early legislative changes, including PS and PSD.