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[qqqbear]

February 14, 2012
Portugal’s Debt Efforts May Be a Warning for Greece
By LANDON THOMAS Jr.


LISBON — As debt-plagued Greece struggles to meet Europe’s strict terms for receiving its next round of bailout money, the lesson of Portugal might bear watching.

Unlike Greece, Portugal is a debtor nation that has done everything that the European Union and the International Monetary Fund have asked it to, in exchange for the 78 billion euro (about $103 billion) bailout Lisbon received last May.

And yet, by the broadest measure of a country’s ability to repay its debts, Portugal is going deeper into the hole.

The ratio of Portugal’s debt to its overall economy, or gross domestic product, was 107 percent when it received the bailout. But the ratio has grown since then, and by next year is expected to reach 118 percent.

That’s not necessarily because Portugal’s overall debt is growing, but because its economy is shrinking. And economists say the same vicious circle could be taking hold elsewhere in Europe.

Two other closely watched countries on the debt list, Spain and Italy, also have rising debt-to-G.D.P. ratios — even though they, like Portugal, have adopted the budget-slashing and tax-raising measures that the European officials and the I.M.F. continue to prescribe.

And on Tuesday, new figures showed that the Greek economy shrank even more than expected last year, as Greece struggles under ever heavier austerity demands by its European lenders.

Without growth, reducing debt levels becomes nearly impossible. It is akin to trying to pay down a large credit card balance after taking a pay cut. You can slash expenses, but with lower earnings it is hard to set aside money to pay off debt.

http://www.nytimes.c...agewanted=print

[qqqbear]

(They did keep it under 5%)

Further, the agency sold EUR 1.5 billion of new February 2013 paper. The yield was 4.943, down from 4.986 paid for one-year paper on January 18. Investors bid double the offered amount compared with a cover ratio of 2.1 in the previous auction.

Portugal is facing increasing economic troubles. Official figures released yesterday showed that the economy contracted at a faster rate in the fourth quarter. GDP decreased a seasonally adjusted 1.3 percent sequentially in the fourth quarter, faster than the 0.6 percent decrease seen in the previous three months. The economy contracted for the fifth consecutive quarter

http://www.nasdaq.co...-20120215-00586