Yet, investors still have bigger worries in the larger markets such as Spain and Italy. Portugal has been praised for the progress it has made on fiscal reforms. In fact, analysts are saying that Portugal is not in immediate danger of default, but the government needs to do a better job of controlling public spending. In contrast, Greece has struggled to make budget cuts and structural reforms. It is predicted that Portugal will return to the public markets in 2013.
Thursday, January 26, 2012
Portugal under pressure, but default unlikely
Portugal, along with many other European countries, has come under close scrutiny recently due to the debt crisis. Many investors fear that Portugal may be the next to fall. Today the yield on 10-year government bonds hit 15%, which is the highest it has been since the introduction of the Euro in 1999, and 3-year bonds hit 21%. Portugal currently has a 162 billion euro debt load, and the fear is that investors could lose up to 50% of their holdings if the country decides to default on its debts. Investors have been looking to Greece as a potential example of what also may happen in Portugal. Additionally, the economy is expected to shrink 3% this year.
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3 comments:
Although Portugal is obviously having many problems that are alarming for their citizens and investors abroad, how come they have been able to take the correct measures to counter this decline while Greece doesn't seem to be able to do anything right?
It is definitely good that Ireland is doing well after the bailout. Hopefully, Greece is able to get back on its feet, but there are still a lot of things to work through for that to happen. Thankfully, according to this article, it appears that Portugal will be able to avoid defaulting and is expected to return to the public markets in 2013. This is good to hear after the government's credit rating was downgraded.
As we hear more and more about the "PIIG" countries (Portugal, Ireland, Italy, Greece), it is uplifting to see that some of the states are using the bailouts effectively. However, I think that countries will need to take a step back from certain expensive social benefits if the EU can be expected to recover completely in a short time. Whether or not they will do this remains to be seen.
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