Portugal - Getting Worse

From Bloomberg:

A bailout for Portugal may total as much as 70 billion euros ($99 billion), said two European officials with direct knowledge of the matter.

A financial lifeline would be between 50 billion euros and 70 billion euros, said the officials who declined to be named because the issue is confidential. Portugal has not yet asked for a bailout. The figures remain preliminary, the officials said. Royal Bank of Scotland Group Plc estimates the cost of a rescue at about 80 billion euros.

Portugal moved closer to external aid after Prime Minister Jose Socrates’s offer to resign left his government in limbo on the eve of today’s European Union summit to address the region’s debt crisis. Two-year Portuguese bond yields reached the highest since 1999. The government retains its powers for now before President Anibal Cavaco Silva meets tomorrow with the main parties to resolve the political crisis or call elections. 

Opposition parties united to reject additional cuts that were the equivalent of 4.5 percent of gross domestic product over three years. The government said the measures were needed to trim the deficit to 4.6 percent of GDP this year and within the EU’s 3 percent limit in 2012.

The spread between Portuguese and German 10-year bond yields widened 15 basis points to 439 basis points yesterday after reaching a euro-era record of 484 on Nov. 11. It was at 444 basis points today. 

Full article here:  BBRG on Portugal Bailout 


This obviously does not bode well for Portugal.  Look for the rating agencies to come out and pontificate and possibly take action.  The PIIGS issue is not dead.