Portugal has requested an emergency bail out from the European Union to address it’s sovereign debt crisis. It becomes the third Euro Area economy to require help from European partners in the wake of bail outs for Ireland and Greece.
The move came after the Portuguese government was forced to pay an interest rate of more than 5% for borrowing money for just one year and in the expectation of the European Central Bank raising policy interest rates in the near future. The Portuguese economy has a major state-sector debt crisis as our Timetric chart below shows. And the economy has been performing poorly for several years with rising unemployment and a steep fall in relative living standards. Already several of Europe’s new economies (including Slovenia and the Czech Republic) have overtaken Portugal in terms of income per capita (PPP adjusted). Portugal’s long-term credit rating was downgraded by Moody’s by one notch to Baa1 earlier on this week.
BBC: EU austerity drive country by country
Independent: Portugal seeks €80bn bailout as third nation falls to eurozone crisis
Guardian: Portugal’s bailout was all but inevitable
Bloomberg: Goldman Sachs Says Portugal Is Last Euro Nation to Seek Bailout
Independent, Sean O’Grady: If Spain fails, it will be too expensive to save
Interest rate on long term government bonds
Portugal - Unemployment Rate (% of the labour force)