SOVEREIGN AND SUPRANATIONALSECTOR IN-DEPTH 16 NOVEMBER 2015ANALYST CONTACTSIrina Baron Asst Dir-Research Associate irina.baron@moodys.comXian Li Senior Research Analyst xian.li@moodys.comABOUT CAPITAL MARKETS RESEARCHAnalyses from Moodys Capital Markets Research, Inc. (CMR) focus on explaining signals from the credit and equity markets. The publications address whether market signals, in the opinion of the groups analysts, accurately reflect the risks and investment opportunities associated with issuers and sectors. CMR research thus complements the fundamentally-oriented research offered by Moodys Investors Service (MIS), the rating agency.CMR is part of Moodys Analytics, which is one of the two operating businesses of Moodys Corporation. Moodys Analytics (including CMR) is legally and organizationally separated from Moodys Investors Service and operateson an arms length basis from the ratings business. CMR does not provide investment advisory services or products.View the CMR FAQ Contact the CMR team Follow us on TwitterMoodys Analytics markets and distributes all Moodys Capital Markets Research, Inc. materials. Moodys Capital Markets Research, Inc. is a subsidiary of Moodys Corporation. Moodys Analytics does not provide investment advisory services or products. For further detail, please see the last page.Sovereign Risk ReportAnti-Austerity Push Lifts Portuguese Credit Risk Newly re-elected Portuguese Prime Minister Pedro Passos Coelho was ousted just weeks after he won national elections after an alliance of left-wing anti-austerity lawmakers rejected his new governments program. This political uncertainty raises fears of Portugal echoing Greeces troubles. In response, Portugals five-year Sovereign EDF' (Expected Default Frequency) 1 , 2 , measure of credit risk has increased noticeably to 0.39% on November 13, its highest level in four months. With high levels of debt and unemployment, Portugals measure of credit risk is greater than that of its southern European peers Spain and Italy, whose respective Sovereign EDF measures are 0.27% and 0.29% (Figure 1).Figure 1: Five-Year Sovereign EDF Measure of Selected European Countries (%)Mr. Passos Coelho first took office in 2011. After raising taxes and cutting spending on public employee salaries, education and healthcare, he was able to meet budget targets set by international lenders to secure $87 billion in bailout funds for the country. Portugals economy has recovered steadily since then. The country exited the bailout program last year without the safety of a precautionary credit line. Despite its recent improvement, Portugal isMOODY'S ANALYTICS SOVEREIGN AND SUPRANATIONAL2 16 NOVEMBER 2015 SOVEREIGN RISK REPORT : ANTI-AUSTERITY PUSH LIFTS PORTUGUESE CREDIT RISKstill restrained by one of the largest public debt loads in the Eurozone, which stood at 130% of the countrys GDP in 2014 (Figure 2), up from 111% in 2011. The countrys combined publ...
