Portugals Disaster - A New Disaster for the Euro Currency ?

Portugals Disaster – A New Disaster for the Euro Currency ?

Portugals Disaster – A New Disaster for the Euro Currency ?

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Home Page > Business > Portugals Disaster – A New Disaster for the Euro Currency ?

Portugals Disaster – A New Disaster for the Euro Currency ?

Posted: Apr 20, 2011 |Comments: 0
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Portugal’s parliament rejected a model new authorities austerity plan Wednesday, spurring the resignation of Prime Minister JosÃ© SÃ³crates and setting off a new section in Europe’s sovereign-debt crisis.

Portugal’s Prime Minister Jose Socrates, left, gestures beside Finance Minister Fernando Teixeira dos Santos throughout a parliament session in Lisbon on Wednesday.

The failure to move the measure, after a heated debate, threatened to push already-excessive authorities borrowing prices to unaffordable levels and drive Lisbon to hunt a bailout.

That will make Portugal the third among the many 17 nations that use the euro to use for help from other members of the European Union and the International Monetary Fund. Greece and Eire went first.

The occasions in Portugal may present a sign of whether the euro zone’s debt travails will likely be contained within three small countries or start to undermine greater economies.

There’s plenty of cash in Europe’s bailout funds to handle Portugal’s possible financing needs over the next few years, working into tens of billions of euros. Nonetheless, if Portugal loses entry to market finance, as now seems seemingly, the result may be to shift attention to Spain, the euro zone’s fourth-largest economy and the one traders have recognized as its next-most-vulnerable, partly because of its weak banking system.

A senior Spanish authorities official mentioned costs of Spain’s bonds and different property could “face some short-term, speculative strain” linked to Portugal’s woes, but, as on prior occasions of intense market volatility, “Spain will continue transferring ahead with its reform efforts.” These have included consolidation and recapitalization of native banks.

Portugal’s crisis might be on the forefront of the agenda of an EU summit assembly in Brussels on Thursday. European leaders have spent recent months cobbling together a comprehensive package deal they hope will remedy once and for all of the euro zone’s debt crisis.

Thursday’s meeting is expected to settle a brand new submit-2013 bailout fund, capable of lend â‚¬500 billion, or about 0 billion, and an accord to improve countries’ competitiveness. However a call on enlarging the lending capacity of the current bailout fund beyond its roughly â‚¬250 billion has been put off.

Portugal’s Mr. SÃ³crates, who is anticipated to serve as a caretaker prime minister till a new government is shaped or an election held, plans to attend the Brussels summit, though his negotiating and policy-execution powers will seemingly be very limited.

Portugal has come underneath quiet strain from other European governments over a quantity of months to take a bailout, however Mr. SÃ³crates has resisted.

Citigroup economists mentioned Wednesday that a vote by parliament to reject Mr. SÃ³crates’s austerity measures would mean rising political uncertainty that “would increase market concerns and consequently…increase the possibilities that Portugal will be compelled to simply accept a formal EU/IMF bailout package.

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