Portugal Asks For Bail Out

Discussion in 'Current Affairs, News and Analysis' started by red_devil, Apr 6, 2011.

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  1. Countries like Portugal, Greece etc all joined the EU on the promise that they had enough funds etc in their respective banks. We already know Greece lied through their teeth and now survive on EU handouts. Portgual has now officially requested the same - BALLS - throw them out.
  2. Wordsmith

    Wordsmith LE Book Reviewer

    No surprises there. The Wall Street Journal publishes the interest rates paid on government bonds.

    Market Data Center Home - WSJ.com

    I've been watching the rates Portugal pays for 2 year, 5 year and 10 year bonds steadily climbing over the past 2 - 3 months. Pretty circular arrangement. The markets get spooked by Portuguese debt so ask for a higher rate of interest before they'll buy the bonds. The rating agencies cut their ratings because the higher interest rates make it more difficult to service Portuguese debt. The markets get spooked by the lowered ratings so ask for higher interest rates. Repeat ad infinitum...

    So now Greece, Portugal and Ireland can't burrow from the markets - and Portugal's need to be baled out will empty the EU's debt stability piggy bank. Gets even more interesting when you consider that the Spanish banks are pretty exposed to Portuguese debt, so are going to take a hit in the not too distant future. Which puts Spain ever more in the firing line as to the next of the PIIGS that are going to get involved in the debt/interest rate death spiral. And Spain is in the "too big to fail" category.

    So the Euro nations now seem to have two options:

    (a) The more financially prudent countries (hi Germany and France) continue to throw money towards the bottomless pit that is Club Med.
    (b) Allow members to exit the Euro - thus trashing the credibility of the currency and the EU.

    The choice is between the devil and the deep blue sea....

  3. the_boy_syrup

    the_boy_syrup LE Book Reviewer

    I think were skint
    We've just bought Pakistan in World Monopoly for £650 Milion
  4. Not to mention that couple of Billion we lend our long lost cousins Ireland.
  5. Or the £295 million in aid given to India every year...
  6. The only good thing about lending this money is we get a hefty bit back in interest, so the more countries that go to the wall the better, in the long run.
  7. Not if we write off the debt...

    Surely if a country comes in to an agreement, but failing to mention little things like (oh, I don't know) they haven't got the cash they say they have then surely they have defaulted and should not receive cash.
  8. As I understand it this could have been avoided if inter-party back-biting within Portugal hadn't derailed the Austerity Package designed to pull the country out of debt. Basically, the people didn't want public sector cuts. Whereas here in Blighty, I have friends in the public sector (and not only within the forces) who are extremely anxious about their job security.

    When did we lose the right to shout "bollocks!" at our politicians and ask nice Mr Brussels for big bags of cash? Again, as I understand it, it's because we're not part of the Euro.

    Difficult decision isn't it? Take the Euro and have to lend a hand in bailing out countries with less financial acumen than my drunken Italian uncle playing monopoly at Christmas time, or stay out of it and have no one to take our cap to when we prove to actually be one of the aforementioned countries.

    (I would like to point out that I just like stealing random businessmen's copies of the FT on trains. The above may be 100% total and utter bovine excretion. I make no claim to being some kind of clever person.)

    Buono Sera,

    Signora Borgia
  9. Er... we are lending a hand in bailing out countries.
  10. Much as I detest the Euro-Whatever, it is an unfortunate fact of life that if the E-W goes Tits Up then the UK will follow.
    The above is what gives me the right to pass comment on all the E-W, it is really Swineland.

  11. Well yes, but voluntarily no? And with a considerable rate of return via interest? As I understand it we would have no say in the matter if we joined the Euro?

    On the other hand, I may well be talking out of my hoop. I did say I make no claims to intellectualism. I do have excellent taste in single malt, but that's only a substitute when I'm forced to talk to my husband's CO unfortunately. :)

    Signora Borgia
  12. The Portuguese politicians didn't want an austerity package in the interests of paying off their debts, hence the resignation of their PM. If Snr. Socrates accepts a bail-out, with the loss of sovereignty that implies, then what will happen at the Portuguese elections? Will the Portuguese people accept that they're no longer independent, or will any party that supports the bail-out get so malletted in the polls that the opposition wins? The voters will have the example of Ireland to look to, after all, and a bit of austerity will be coming their way, like it or not, UNLESS they leave the Euro and devalue. Could be very interesting times.
  13. All the countries that rely on tourism are going to have a bad few years. We will pay them whether we go abroad or not. they should at least give us all a free fortnight in the sun for our generosity.
  14. They should give us the freehold on a couple of islands. Lanzarote and Corfu would do nicely, if we're gong to have to shell out. I think we've got enough of Ireland...
    • Like Like x 1
  15. Alsacien

    Alsacien LE Moderator

    You are more or less correct.
    The UK has its signature on the EFSM which is valid until 2013, there is only a underwriting role defined there. This is a 2 way street of course, and some sort of defined agreement to stabilise countries that could have a financial impact on the UK makes some sense.
    The EFSF is a Luxembourg company owned by the Eurozone members (not involving UK), and there is actual funding available to members - albeit at relatively high interest. Its protocols are based on the IMF ones.
    Bi-lateral loans are also possible, the UK saw the chance to make few quid out of the Irish predicament so made a loan directly, as an investment option it makes sense, especially with the vested interest of UK banks.
    And finally you have the ECB monetary policy instruments which have been working in the background while stacking up the silver in the cellar (the silver being eligible assets pawned to the ECB to the tune of nearly 4000 billion).
    The only problem in all this as actually Spain, and that appears to be getting itself sorted enough to keep its head well above the waterlevel.
    Portugal will get a better deal than Ireland, mainly because they will do as they are told [eventually]. The Irish could have gotten a better deal if they had played ball with corporation tax....