Friday, April 16, 2010

Debt Worries Shift To Portugal; Greece Borrowing Rates Back Near Highs

Concern over Portugal has now hit the front page as noted by the New York Times in Debt Worries Shift to Portugal, Spurred by Rising Bond Rates http://www.nytimes.com/2010/04/16/busin ... tml?src=mv

Next target: Portugal.

Speculators have begun to zero in on another small member of Europe’s troubled monetary zone, highlighting the same economic flaw that brought Greece to the verge of insolvency: a chronically low savings rate that forces a reliance on the now-diminishing appetite of foreign investors to finance persistent deficits.

Just as investors are turning their attention to the next vulnerable country, Greece moved a step closer on Thursday to activating a $61 billion rescue package, as Prime Minister George A. Papandreou asked the European Union and the International Monetary Fund to meet in Athens next week.

The aid package agreed on last weekend — aimed at calming fears of a Greek default — has not yet had its desired effect. The yield on Greek 10-year bonds briefly topped 7.3 percent Thursday, not far from the 7.5 percent it was at before the rescue package was announced. Interest rates on 10-year government bonds for Portugal have also been rising, hitting a high of 4.5 percent on Thursday.

“Now there will be more fiscal profligacy in Europe, more political fractures and ultimately the possibility that some countries might want to leave the euro zone,â€