Just as the Euro zone countries were breathing a sigh of relief over Spain refinancing parts of it’s debt, not Portugal is crumbling both politically and economically.
The Prime Minister of Portugal has resigned as austerity measures could not be forced through. This leaves an enormous problem for the Euro zone. There is no plan in Portugal to sort out their fiscal crisis, and yet cuts off the political means to negotiate either fiscal austerity measures or an impending bail out from the other EU countries.
This will not just affect the Euro zone countries but all within the EU. It is widely accepted that the UK will be billed £3 billion for underwriting any bail out, even though we are outside the Euro zone.
The European central bank and IMF are waiting in the wings to prevent another domino from falling.
Portugal need to refinance £4 billion of its debt in April and the rates of refinancing are becoming prohibitively high. Moody’s has also downgraded the credit rating of the Spanish Banks. The crisis simply rolls on.
The big problem is not bailing out the Portuguese economy IF there is a political leader to do a deal with. But that if the domino effect hits Spain, many believe this economy is simply too big to be bailed out.