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Morgan Stanley: Portugal may need new bailout until September

Morgan Stanley analysts published a report expressing the opinion that Portugal is likely to ask for a new bailout by September, suggesting that weak economic growth and unsustainable bond yields may trigger the need for additional financial help.

Economy What's New — 20 April 2012 by Pedro Carreira Garcia

Morgan Stanley: Portugal may need new bailout until September

Portugal will not resist the markets’ pressure and will ask for a new bailout by September, according to financial services giant Morgan Stanley in a study quoted by news agency Bloomberg.

The brokerage firm said that the country will not resist the deterioration of the economic conditions as it struggles with harsh austerity measures implemented after the €78bn bailout signed almost a year ago.

“We expect a deeper recession than official projections and consensus estimates”, the report claimed, as official government forecasts point to a 3.3% recession in 2012. Meanwhile, recent forecasts by the Bank of Portugal point to a contraction of 3.4% of GDP in 2012.

Bloomberg also revealed that Morgan Stanley’s report recommended that “investors with exposure to Portugal should switch from short-term to long-terms bonds” also recommending “selling Portugal’s bonds due 2017 and buying debt maturing 2037″, the news agency said.

This assessment comes at a time when a second bailout seems more than speculation as the government cautiously prepares the markets and Portugal’s international partners for an extension of financial help beyond September 2013 to service the country’s debt obligations from then on.