7th April 2011
F&C: Portugal requests a bailout
Ted Scott, Director of Global Strategy at F&C Investments, comments
The announcement that Portugal is to seek financial aid from the EU was hardly a surprise and, indeed, the Euro has remained strong and Spanish bond yields (the next most vulnerable country) have actually tightened since the news.
The decision was triggered by an unsuccessful auction yesterday of €1bn of 6 month and 12 month bills that Portugal had to pay an interest rate of 5.9% to secure. The Portuguese banks have also been increasingly reluctant to buy its country's debt and the cost of financing the deficit was spiralling upwards. With the opposition voting against the austerity package proposed by the government it has left a political vacuum that made a bailout inevitable.
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