Portugal and Spain could be next in line for bailout

| November 22, 2010 | 0 Comments
Portugal and Spain could be next in line for bailout

Jean-Claude Juncker, Luxembourg Prime Minister and Eurogroup Chairman, has warned that Ireland’s debt crisis could spread to Portugal and Spain, despite assurances from both countries that Ireland’s emergency bailout will allay investors fears.

Today, Portuguese Prime Minister, Jose Socrates, said it “has no need for any aid” and insisted that its difficulties are different to those in Ireland, while Spanish Foreign minister, Trinidad Jimenez, insisted today’s Irish deal will “stabilise” the euro zone.

However, it appears that many market analysts share Mr Juncker’s opinion and believe that Portugal is the country at the most risk following Ireland and Greece’s bailouts.

Over the last few weeks, Irish, Portuguese and Spanish Government borrowing has surged to record levels, which suggests a lack of investor confidence.

Yields on Portuguese bonds have been steadily rising over the last month. Today, the rate of return on 10-year bonds reached 6.560%, against 6.508% last Friday.

In addition, spiralling deficits in Portugal and Spain are making markets nervous and failure to hit Government targets for bringing down the deficit could cause a market panic over Portugal early next year, according to economists.

The emergency bailout for Ireland is said to be in the region of between €80 billion and €90 billion. Greece was the recipient of an €110 billion bailout in May.

However, a bailout for Portugal would be less than €50 billion, according to analysts, while bailing out Spain would require a much larger sum.

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