While America was distracted with issues of guns, political rhetoric, and domestic violence, the sovereign debt crisis in Europe reached its next tipping point.
Alan Wilde, head of fixed income and currency at Baring Asset Management, said: “The crisis is reaching another key phase with debt auctions this week. It seems unlikely that Portugal can avoid a bail-out.”..
In a further blow to Mr Sócrates, António Bagão Félix, a respected former finance minister and rightwing politician, said on Monday that it was no longer a question of “if” Portugal would have to turn to the European financial stability facility, the EU bail-out fund, for help, but “when”.
The cost to the country of high bond yields was increasing every day, he said. “The situation is unsustainable.”
The European Central Bank was forced to intervene on Portugal’s bond market on Monday when investors came close to abandoning the country’s debt entirely. The yield on 10-year bonds reached a near high of 7.18%, a rate similar to that which triggered the bailouts of Ireland and Greece.