Financially troubled Portugal raised €990 million ($1.34 billion) Wednesday in a key bond auction that had more bids than bonds available, suggesting the government's austerity plan is easing market concerns about the country's ability to pay off its high debts. Alberto Soares, president of the Portuguese debt agency, told The Associated Press the institution received bids worth €1.58 billion ($2.15 billion) for the April, 2021 bonds at a rate of 4.17 percent. The agency had intended to auction just €750 million ($1.02 billion) but agreed to sell more as demand soared. “It went very well,” Soares told The AP by phone. The auction came two days after the minority Socialist government unveiled the broad outline of a four-year plan designed to allay fears it could face similar problems to Greece. A budget crisis in Athens has triggered violent demonstrations, unsettled the European Union and undermined the 16-country euro currency, of which Portugal is a member. Ben May, a European economist at Capital Economics in London, said the interest rate on the bonds was “broadly in line” with what could be expected for the period of maturity. He added that Portugal's difficulties are not as deep a Greece's because “debt is lower and, secondly, (Portugal) doesn't have the same credibility issues.” The EU has accused Greece of faking its budget statistics for years. While the debt is lower than Greece's, financial markets have expressed concern about Portugal's slide into the red. Portugal has one of the euro zone's smallest economies. Analysts were keen to see whether the Portuguese could find enough bidders for their bonds at a time when other debt-burdened countries are also looking to finance their deficits through bond issues. Failure to draw interest would have indicated Portugal could encounter difficulties financing its debt at an affordable cost. The auction Wednesday “was a very positive indicator” of market sentiment about Portugal, Soares said, adding the agency intended to issue bonds worth €18-20 billion ($25.5-$27.2 billion) this year. A €1 billion ($1.36 billion) bond issue last month, at a rate of 4.416 percent, was also heavily oversubscribed, the debt agency said. The government's austerity plan won some praise Wednesday from the Paris-based Organization for Economic Cooperation and Development. The OECD said it “welcomes the authorities' consolidation strategy, which goes in the direction of maintaining market confidence, supporting growth and ensuring fiscal sustainability.” Portugal's budget deficit is projected to have hit a record 9.3 percent of gross domestic product last year. The government says it will bring it back under 3 percent of gross domestic product by 2013. Public debt is expected to climb to 85.4 percent of GDP this year, up from 76.6 per cent in 2009. The government predicts it will peak at 90.1 percent 2012 before falling back. The country's total debt at the end of January was €133.7 billion ($182 billion), of which €93 billion ($126 billion) was in fixed-rate bonds. A 10-year bond issue of €5.9 billion ($8 billion) matures May 20. The government's austerity plan prunes welfare benefits and government hiring while also selling assets and raising taxes on the well-off. It aims to avoid downgrades by rating agencies, which would raise Portugal's borrowing costs, and cut the deficit without choking economic recovery.
