"Although the grinding austerity has kept the economy mired in a painful recession, Portugal’s troika of lenders (...) have praised the country’s progress on fiscal retrenchment. "We don’t believe the government can do more", Peter Weiss, a European Commission economist, said after the third assessment in April this year. Markets also indicate some tentative improvement. Lisbon’s two-year bond yields have dipped below 5 per cent, the lowest level in more than a year, and the benchmark 10-year bond yield briefly fell below 9 per cent earlier this month, and is one of the best performers in Europe this year. (...) "A certain level of confidence has returned in Portugal, where the government continues to enjoy enough support to push forward with a very tough adjustment programme", Gilles Moec, European economist at Deutsche Bank, said in the note. Nonetheless, investors and economists warn that Portugal still faces daunting challenges. (...) The IMF has already made clear that Portugal’s deficit targets are not "cast in stone" and could be adjusted to allow for economic developments. By allowing Spain to increase its 2012 budget deficit target twice, the EU has also shown it is prepared to be flexible. Indeed, many investors and economists expect Portugal’s adherence to the bailout programme’s conditions will win it more time from the troika, and possibly more aid until it can fund itself from private sector lenders. "Lisbon is doing more than enough to justify continued support from the EU", Mr Moec argued in his note."
Robin Wigglesworth and Peter Wise, "Portugal makes fiscal progress in the shadows" (FT, 28.8.2012).
