Portugal in bailout talks
After months of speculation, it has been announced that Portugal will seek financial help.
EU finance ministers are set to meet in Hungary this week when the bailout will be discussed.
Portuguese borrowing costs rose to more than 10% this week – the first time since the introduction of the euro.
A surge in borrowing costs forced Greece and Ireland to seek emergency aid and Portugal is the third euro zone nation to seek help.
It is unknown how much Portugal will ask for but reports suggest it could be in the region of €80 billion (£70 billion).
The news of the bailout comes just days after Moody’s downgraded Portugal’s debt rating, for the second time in less than a month, by one notch to Baa1 from A3.
There have been fears over recent months that the debt crisis in the euro zone could also spread to other weaker economies, such as Spain, and investors will be watching the country closely.
However, the Spanish Government continue to refute claims that the country will need help.
In the meantime, the European Central Bank (ECB) is in the midst of its rate-setting meeting and interest rates are likely to be lifted to combat rising inflation.
However, this could create problems for debt-laden countries.
The ECB will announce its decision later today.