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Portugal keeps access to EU financial help

Portugal kept its much-needed access to EU financial help Friday after an European Central Bank-approved credit agency maintained its rating of Portuguese debt at investment grade level.

Toronto-based DBRS announced it had kept Portugal’s rating at “BBB” level, with a “stable” perspective.

“The rating reflects Portugal’s eurozone membership and its adherence to the EU economic governance framework, which helps foster credible macroeconomic policies,” it said in a statement.

“The centre-left minority government continues to demonstrate commitment to comply with the EU fiscal rules and important structural reforms are not expected to be reversed,” it added.

DBRS’s decision was much anticipated as it is the only one of the four agencies accepted by the ECB to have maintained Portugal’s rating in an investment grade category despite the country being hit hard by a debt crisis.

If the agency had downgraded its rating, the ECB would no longer have been allowed under its rules to purchase Portugese government bonds under its quantitative easing programme.

The ECB purchases of the bonds on the secondary markets help keep the interest rates down and ensures a market for new issues by governments, ensuring a key source of financing for governments remains open and affordable.

Portugal received a 78-billion-euro international debt bailout in 2011 that saved it from defaulting when it could no longer issue debt at affordable rates, but in return the country had to introduce a string of austerity measures.

A minority Socialist government which came to power last year has reversed some austerity measures imposed by the previous conservative administration while continuing to reduce the deficit, although at a slower pace.

Prime Minister Antonio Costa’s spending plan targets a budget deficit of 1.6 percent of economic output in 2017, down from a forecast 2.4 percent this year — well below a EU limit of 3.0 percent.

Portugal posted a budget deficit of 4.4 percent of gross domestic product in 2015, the third highest in the EU after Greece and Spain.