Portugal weighs on euro zone sentiment

Investors struggle to identify fresh drivers of growth in single currency bloc

People shout slogans during a rally calling for new general elections near the Portuguese presidential palace in Lisbon. Photograph: Jose Manuel Ribeiro/Reuters.

People shout slogans during a rally calling for new general elections near the Portuguese presidential palace in Lisbon. Photograph: Jose Manuel Ribeiro/Reuters.

Mon, Jul 8, 2013, 10:04

Portugal’s government crisis posed a threat to its bailout programme and investors struggled to identify growth drivers going forward in the euro zone, a survey showed on today.

Sentix research group said its index tracking investor sentiment in the 17-nation currency bloc slid to -12.6 in July from -11.6 in June.

“Although it appears, as last month, that we’ve overcome the weak period at the start of the year, the majority of investors cannot imagine more momentum in the economy at present,” Sentix said in a statement.

“The overall index was most hit by Portugal’s government crisis. We saw something similar in March, albeit more pronounced, when investors were unnerved by the uncertainties surrounding Italy’s struggle to form a government.”

Portugal’s prime minister promoted the head of the junior coalition party to be his deputy on Saturday, hoping to end the political rift that threatened to bring down his government.

The crisis in the coalition broke out following the resignations of the finance and foreign ministers last week and has jeopardised progress of Lisbon’s programme under its 78-billion-euro bailout from the European Union and IMF.

A sub-index of euro zone expectations was unchanged at 7.3 in July from the previous month, reflecting investors’ inability to identify fresh growth drivers in the economy.

The index on Germany by contrast rose to 18.4 from a previous 16.2.

Reuters