Sparks of optimism

Debt-straddled Portugal returned to the bond market last week, giving investors reason to be optimistic about the country's economic recovery.

For the first time since its bailout two years ago, Portugal issued five-year bonds. Only a long-term debt issue, however, will show whether the capital markets will trust the country. If the recent bond issue is any indication, the markets apparently do.

Psychological boost

Demand significantly exceeded the targeted 2.5 billion euros ($3.4 billion), with numerous bids from abroad. The fresh capital will help fill state coffers.

The successful bond issue has given the Portuguese an important psychological boost in their struggles to overcome the debt crisis.

"The successful placement of Portuguese government bonds at this particular stage and the fact that bonds were oversubscribed is seen here as a huge success for the Portuguese government's consolidation policies," said Hans-Joachim Böhmer with the German-Portuguese Chamber of Commerce in Lisbon, noting that the original goal was to return to the market in September 2013.

At the first German-Portuguese Forum in Lisbon on January 24, German Foreign Minister Guido Westerwelle congratulated the Portuguese government a day after the bond sale, referring to the positive news from the capital markets as "very encouraging."

Favorable conditions

Politicians in Brussels were also relieved to hear the news. EU Economic and Monetary Affairs Commissioner Olli Rehn said Portugal and Ireland, which has shown other eurozone members how to overcome their sovereign debt crises, should be allowed to pay back their bailout loans later than originally agreed. His argument: if Greece can receive favorable conditions, so should these two countries.

The ability to finance debt on capital markets, Rehn said, is in the interest "not only of Portugal and Greece, but also of the entire European Union." 

In May 2011, Portugal was bailed out by the European Union and the International Monetary Fund to the tune of 78 billion euros. In return, the country agreed to introduce strict austerity measures and reforms to clean up its public finances and boost its economy. By the end of the year, Portugal aims to reduce its budget deficit to 4.5 percent of gross domestic product (GDP).

Böhmer said he expects the Portuguese government to raise taxes this year to stay within its debt target as agreed with the so-called troika of the European Commission, European Central Bank and International Monetary Fund. But development has two faces, he added.

"On the hand, Portugal can return to the capital markets," he told DW. "But on the other, its people are feeling some pain from the austerity and reform measures."

Future prospects

The modest economic growth forecasts for this year and the rising number of Portuguese leaving the country show to which extent Portugal is still walking on thin ice. Young people are particularly gloomy about their future prospects, and many are seeking jobs abroad. Youth unemployment has soared to 39 percent, with total unemployment now hovering at 16 percent.

"The Portuguese who don't see any opportunities here are looking for opportunities in other countries and not only in Portuguese-speaking countries such as Angola," Böhmer said. Last year, about 6,000 Portuguese found work in Germany. "The year before, the number was 15 percent lower," he said.

Helena Viera is among those looking to leave. "I thought a lot about leaving here for a better life," the 22-year-old said. She worked part-time as a cook in the Algarve for 4 euros an hour, earning about 500 euros a month. But the job ended four weeks ago after the restaurant was forced to close for lack of customers.

Now Viera is headed to the former Portuguese colony of Angola, which used to see its workers flee to Portugal for work. She's convinced of making the right decision.

Pursuing new paths

"I see the young people leaving," Viera said. "The only people staying here are those who don't have many opportunities because they're too old."

Viera is one of many seeking a new future in Angola. Long lines form every Tuesday and Wednesday in front of the Angolan consulate in Lisbon.

The Portuguese government is pursuing new paths to raise capital and improve the situation. One of them is to attract wealthy immigrants. Last October, it passed a new law that allows foreign investors investing huge sums of money in the country to apply for a Portuguese passport. But so far, few have seized the opportunity.

Door to the European Union

"We're told that applications are being processed," Böhmer said. "We don't expect thousands of people have sought to enter Portugal this way over the past half year. It certainly won't be as large as the wave of Portuguese who have sought work in other countries."

Portuguese human rights organizations have criticized the law. They said it attracts investors who do little for the country while abandoning other immigrants who have lost their jobs because of the economic crisis. The groups have said they also suspect that foreign investors are less interested in investing in Portugal than they are in the possibility of having a passport that automatically opens doors to opportunities across the European Union.