RSS
Portugal's collapse: Is a $100 billion bailout inevitable?
The European debt crisis worsens yet again, with Portugal now facing financial meltdown
Beyond Portugal's stunning ocean views is a serious financial crisis that may require a massive bailout from the European Union.
Beyond Portugal's stunning ocean views is a serious financial crisis that may require a massive bailout from the European Union.
CC BY: Lee Cannon
F

irst came Greece, then Ireland. Now, Portugal looks set to become the latest European country to require a financial lifeline from the European Union. The country's prime minister resigned on Wednesday after his government refused to approve new, stricter austerity measures, and credit ratings agencies promptly slashed Portugal's rating. Political uncertainty could not have come at a worse time for Portugal, which must pay off almost 10 billion euros of its debt by mid-June. The country may also have to borrow between 70 and 80 billion euros ($99 billion to $114 billion) from the E.U. to finance its continuing obligations. But a bailout would undoubtedly anger the eurozone's better-off countries, after the 177.5 billion euros ($250 billion) loans to Greece and Ireland last year. Is a bailout in Portugal inevitable? (Watch a Euronews report about Portugal's predicament)

Yes. Portugal is bust: Although its problems aren't as serious as Greece and Ireland, says The Economist, Portugal's economy is in big trouble. The government now predicts the country will slide back into recession, and the austerity measures already in place will "likely slow the economy further." All of this will make it very difficult for Portugal to pay off its sizeable short-term debts. "Default looks inevitable."
"Buying time is expensive"

No. Portugal can look after itself: Portugal will pay off its debts without E.U. assistance, says Portugal's outgoing Prime Minister Jose Socrates, as quoted in the The Wall Street Journal. "What we need is confidence from the European Union." They must trust that Portugal has the ability to restructure its economy to meet its obligations. "All the budget goals we had will be met, independently of who will run the country."
"PM says Portugal able to finance itself in market"

The real question is what happens to Spain: Portugal's crisis is not a big surprise, says Eric Karlsen at TIME. "A much bigger question mark resides next door in Spain." Europe's fifth-largest economy is in turmoil, and if markets decide that Spain is unable to pay off its debts — which dwarf those of Portugal, Greece or Ireland — the eurozone could be capsized entirely. Luckily, the "pessimism that surrounded Portugal hasn't infected its larger neighbor — yet."
"Portugal's government collapses — will a bailout follow?"

EDITORS' PICKS

THE WEEK'S AUDIOPHILE PODCASTS: LISTEN SMARTER

Subscribe to the Week