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Will Financial Problems In Portugal Cause The European Debt Crisis To Spiral Out Of Control?

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Most Americans have no idea just how bad the financial problems over in Europe are right now.  The truth is that the entire European financial system is teetering on the brink of disaster.  Ireland and Greece have already received bailouts and Portugal, Spain, Italy, France and Belgium are all drowning in an ocean of unsustainable debt.  Sovereign credit ratings all over Europe have being slashed in recent months.  For example, a while back Moody’s Investors Service cut Ireland’s bond rating by five levels.  Up until now Europe has weathered all of this financial instability fairly well, but now huge new financial problems in Portugal threaten to send the European debt crisis spinning out of control.

The Prime Minister of Portugal, Jose Socrates, resigned on Wednesday after the major opposition parties banded together to vote down the austerity measures that he was requesting.  The package of budget cuts and tax increases was intended to get Portugal’s horrible debt crisis under control.  Prior to the vote, the prime minister warned that  he would no longer be able to run the country if the austerity package was not passed.

Now there are all kinds of questions about what is going to happen to Portugal.  At this point most financial authorities in Europe seem to be assuming that Portugal is going to need a bailout.

Today, Standard & Poor’s reduced the credit rating of long-term Portuguese government debt from “A-” to “BBB”.  Standard & Poor’s is also warning that the credit rating may be cut further if negotiations for a bailout do not go well.

Without a bailout, it seems almost certain that Portugal will default.

Interest rates on Portuguese government debt have risen to unsustainable levels.  The yield on 10-year Portuguese bonds hit 7.78% on Friday.  That was the highest it has been since Portugal joined the euro.

Authorities in Portugal are publicly saying that they simply cannot afford to pay that kind of interest.  Unfortunately for them, it appears that Portugal is going to be forced to issue more bonds by June at the very latest.

So how much would a bailout of Portugal cost?

Well, according to one estimate, it would probably be in the neighborhood of 70 billion euros.

That isn’t going to sink Europe.

However, the concern is that the crisis in Portugal could have a domino effect.

There is increasing worry in Europe that Portugal’s neighbor, Spain, could also need a bailout.  But a bailout of Spain would potentially be so large that it would cause a financial nightmare for Europe.

The following is how a recent article in the Wall Street Journal sized up the problem….

Portugal’s admission that it will probably need a financial bailout raises a question that will shape the outcome of the euro zone’s debt crisis: Is Spain next?

The cost of saving Spain, a €1.1 trillion ($1.56 trillion) economy, would dwarf previous bailouts and could test the financial strength of Europe as a whole.

The truth is that the rest of Europe simply does not have the kind of financial muscle necessary to continue putting together huge bailouts indefinitely.  If Spain does go down, it is going to put a massive amount of strain on the rest of the continent.

There are other financial problems simmering in Europe right now as well.

According to a recent Business Insider article, the financial problems in Ireland are also creating a lot of concern at the moment….

Ireland’s banks are likely to need another $39 billion in support, which would use up 80% of its current bailout funds.

Ireland is a financial basket case right about now.  Confidence in Irish debt is rapidly evaporating.  In fact, the yield on 10-year Irish bonds recently hit 10.12%.


But that is nothing compared to what Greece is being forced to pay.

The yield on 10-year Greek bonds recently reached an astounding 12.58%.

There are persistent rumors that Greece is going to need yet another bailout.  The truth is that Germany and the other European nations that are coming up with the cash for these bailouts are just pouring their money into financial black holes.

Nations like Greece and Ireland are just money pits at this point.

As I have written about previously, the financial collapse of Europe has basically become inevitable.  The EU can keep coming up with bailout plan after bailout plan, but they are only putting off the crash for a while.

Eventually a point will come when all of the balls simply cannot be kept up in the air anymore.

So what is going to happen once that point is reached?

Well, many believe that we could actually see the end of the euro and potentially even the break up of the European Union.

Of course top politicians in Europe will fight tooth and nail to keep that from happening, but the truth is that at some point we are going to see some incredibly challenging financial problems in Europe.  How the EU responds to the crisis is going to be extremely interesting to watch.

So many people talk about the death of the U.S. dollar, but the truth is that we could very easily see a financial collapse and a major currency crisis in Europe prior to the collapse of the dollar.  Europe is in really, really bad shape right now.

Of course it doesn’t help that the entire world is so incredibly unstable right now.  The disaster in Japan, the war in Libya, the revolutions across the Middle East and the surging price of oil all threaten to throw the global economy into turmoil.

As I discussed in a previous article, people need to start preparing for economic disaster.  The entire global financial system is coming apart.  The U.S. economy is crumbling, Europe is dealing with an unprecedented debt crisis and Japan has just been struck with the worst economic disaster that it has seen since World War 2.

Most Americans don’t pay much attention to what is going on in Portugal (or in the rest of Europe for that matter), but they should.  The world is more interconnected than ever, and if Europe experiences a financial meltdown it will have dramatic consequences for the United States as well.

The financial crash of 2008 swept the entire globe and virtually every nation on earth was deeply affected.  The next wave of the financial crisis is also going to be felt globally.

We live in one of the most interesting times in the history of the world.

Are you prepared for what is about to happen?

  • Sepp Meier

    The brute and ignorant American populace is more concerned about who is going to be the next “American Idol” instead of focusing on real issues. The sooner the world economy collapses the better, because mankind will finally realize that the monetary system is indeed a total failure. We need a resource-based economy.

  • Marilyn Gjerdrum

    The debt is expanding, and the money is disappearing. Of all transactions in the stock market, seven out of ten are high frequency trades. Those are split-second purchase and sales of stock run by the big fund managers for quick profits in the millions. That is why our markets continue to go up even though the world economy is sinking. Money continues to be sucked from our markets at record rates with nothing in place to mitigate the pending collapse.

    One thing nobody is discussing is the dramatic shift Japan has undergone. They have been a major lender to the US at very low interest rates for years, they will no longer be able to carry US debt. They are domestically at 249% debt vs GDP with a nation to rebuild.
    China has been divesting themselves of US debt and raising their interest rates every month, they won’t be a great help to US interests, either. They are working to dump the US dollar as the world standard and go to the Yuen instead. They have set up trade deals with Russia using their own currencies leaving the US dollar out of the deal. They have made similar deals with other Arab nations and countries in South America as well.
    The party is over, and at some point soon, it will become apparent to all. Thanks for a good article.

  • dandiar

    That’s simple, Rothschild will simply ripped them off…

  • 007

    The European debt crisis, middle east unrest, rampant inflation, soaring oil prices, unemployment or our debt crisis. Any of these can be the straw that breaks the camel’s back. There sure are a lot of straws. Something is going to give and soon.

  • Emily

    Thank you for this web site. I find that I am turning to your articles more and more for information. I am learning about the world’s financial crisis but know next to nothing about my own financial problems. I know I am not alone…


  • Giampi

    Yes we can

  • To late for austerity measures, Europe like America has bled the public dry. What will they cut that is left besides necessary services and how will they tax an already over taxed unemployed public?

    Imaging any country having faith that America can handle this worldwide economic crisis after it was American business criminals that caused it.

  • David

    The answer to this question is yes it will affect Europe big time and more crisis in USA will unfold themselves. In addition to Middle East and African countries are on the verge of chaos; then I think we will have wars and more chaos. Once again our civilization proved that the human nature is destroying one another until the end of time!

  • Phrygian cap, aka Michael2

    I was reading for the part in the article that would some how blame Americans for the European disaster as well. That will probably be in the next article.

    Tens of thousands protest in London over cuts–Violence feared as biggest demonstration since Iraq War in 2003 masses on British capital. . .

  • impeachRonPaul

    We need to have everyone contribute. Churches pay no taxes and yet consume our money. Why are they not willing to contribute anything? All they do is take. They demand roads and sidewalks and services to support their buildings. Clearing snow and upkeeping transportation. They rake in billions and give back nothing. Time to level the playing field. Tax the churhes not just the people.

  • The debt rating agencies like Moody’s, Standard & Poor’s, etc. are all part and parcel of the greatest Ponzi Scheme in mankind’s history. Without them greasing the financial wheels, things like MBS’s and CDO’s and the Irish “economic boom” would never have happened.

    They give all these Ponzi Scheme a patina of financial legitimacy.

    Their biggest crime and contribution is to the financial instruments of mass destruction of the United States, i.e., the U.S. “Treasuries.”

  • Thank you for the very informative article about the European Union and their combined debt load!! It’s just another sign that the domino effect in the world is going to begin very soon!!! There is nothing that can stop it now, it’s went too far!!The bible speaks of Earth’s final events as “The Appointed time of the End.” Several Bible writers write about this period of time because the end of sin will be marked by a complete spiritual and physically reconfiguration of Earth. In a small way, signs of this coming transformation are visible already. For example, financial chaos in the markets of the world are ready to explode!!! The US, Japan, and most of the European Union are drowning in debt. Civil and political unrest in the Middle East is spreading daily and it’s coming to a head soon with the possibility of a nuclear attack from some rogue country that wants to destroy Israel and the US. Here is another example, weather patterns have gone crazy. Flooding, drought, tornadoes, and hurricanes are producing more havoc. Seismic activity is also increasing. According to the USGS, more earthquakes measuring 6.0 and above are on the increase. Our planet now has over 400 active volcanoes. Are these physical changes a sign of what is to come? Yes, if you understand that sin has doomed this planet. Consider the financial impact from nature’s violence on the financial institutions of the world. Many insurance companies cannot afford the losses. Moreover, the economy of the twenty richest nations on Earth is nothing more than a house of cards. A global earthquake, a global fire, or an asteroid impact could easily cause the cards to fall. Wake folks before it is too late!!! The Lord is about ready to enter into the affairs of mankind very soon!!! Be vigilant, ready and get prepared spiritually, you will be eternally glad you did! This web site will give you the spiritual tools you will need in the coming months. Take a serious look at:

  • William

    Unwinding the excesses will be quite difficult for the EU members in trouble. The Irish will make the hard choices and gut it out. Greece is HOPELESS, as is Portugal and Spain. There are more unsold houses in Spain than the USA, with a much larger population.
    The citizens of France, Germany and Belgium will balk at more bailouts. Here is the bottom line…..those in the EU who did not retain their own currency, and are now in trouble, will sufffer a lot.

  • Matt

    As long as those rating agencies keep cutting ratings for European countries the US will be alright… When will they finally cut the rating of the USA to what it should be?
    You think European debt is bad, but what about all the states in the US that ave massive amounts of debt?

  • Spent

    It just seems that if you provide the currency ( print money or claim it is there digitally ) that the game can go on for a long, long time. The politicians, who really are our first line of defense against this corrupt system ,will always kick the can down the road ,for their existence demands that. The new world that we are hurtling to will bring unprecedented pain and suffering-most of who you and I know will suffer greatly at the adjustments to our standard of living. The price to be paid is our own fault for not utilizing the best mankind has to offer and resetting our goals so all can benefit from out last centuries great and vast technologies. Instead of life (broad human compassion)we choose death (war). Wars are reality but not to the extent our race has insisted upon them , it could never be that the benefit outweighed the cost,never.

  • JulietteofOhio

    We’re as prepared as we’re able to be, which probably isn’t great. We’re honestly considering the “junk land” proposition as set out by “Bison Survival Blog”. We are both over 65 (The greedy old people who are sucking America dry) but are both still working. We have a house that still has ten years remaining before payoff (My husband has been laid off three times in the last 15 years and we’ve had to re-locate each time, ensuring we would lose money on every house we purchased. We also had two children late in life and just finished sending them to college for which we paid, leaving nothing in our IRA. Of course, they have no student loans and are both working without that boulder hanging over their heads.) We may be greedy for wanting the money back we were forced to pay into the system, but we are not rich. Other than the house note, we have no debt except for Ohio’s ever-growing tax demands. We have life skills and stubborn spirits, but no, I don’t think we’re prepared for the melt-down, nor do we know anyone who is. It’s hard enough to even get people to pay attention, much less do anything about the impending catastrophe. We moved to a very small village outside the crime-ridden city where my spouse works, but the village is so small it has no bank, no grocery, no gas station nor any other type of services available. Most here are elderly, although there is a troubling influx of welfare folk trying to escape the larger city’s problems. I can and garden and we raise chicken and sheep, but it remains to be seen how safe that will be. We may both be behind our stout front door trying to defend ourselves and our livestock. Good luck to the party people who foresee absolutely no sign of the rapidly approaching onslaught. Thanks for your insight!

  • Stephen

    Maybe the Amish had the right idea all along. XD

  • Portugal is not big enough. The UK will be the one.

  • game over

    portugal is the defacto lehman brothers, the eu has already decided portugal’s fate.all the major players have decided spain is too big to fail leaving portugal to drown in a sea of bailout this time, r.i.p.

  • TucsonKK

    No Money – big debth
    Slash wages/cut hours/raise taxes
    add inflation & high gas prices
    But by all means bailout the crooked bankers and pay out bonuses
    Let’s get real and WAKE UP
    the working people taxpayers have to suffer for the Corporations & Banks that pay no taxes (Exon,GE,Bank One,Etc) and now the TEA PARTY & the Feds want these same Corporations to get more Tax Breaks
    Why don’t we as taxpayers just start paying them to exist and make their profits in this Global World

    Time for the Taxpayers to take control of this Country and fill up prisons with white collar criminals.

    • d shatin



  • The credit rating of Portugal is still decreasing in the eyes of the rating agencies. This is really dangerous for the country and can cause problems with the debt crisis.

  • martin

    The problem is we should never have tried to build this European Union it is a scam and a farce.
    Even in America the union of states is likely to collaps in the future becaus you can`t expect those who pay the bills on time to pick up the bills of those who spend money they don`t have.
    And in Europe we have different cultures and customes in each country in opposite to america.
    For example the Greece have had much more corruption in there economy and the Greek goverment can not even collect the proper taxes owed by the people i believe it was in the vicinity of 20 million of shortage.
    How long do countries who have a balanced budget and thriving economies have to pay for those who long time didn`t care about budget and rules.
    I am for helping other countries and nations but they have to meet a certain standard otherwise it will fail horrificly and put all of us in the poorhouse.
    And those criminal bankers should be prosecuted
    and put in jail alongside with the likes of Bernie Maddof.

  • mondobeyondo

    Perhaps the European Union will bail out Portugal.

    Perhaps the European Union will bail out Spain.

    Who is going to bail out the USA?? Because we WILL need a bailout from someone, or we are screwed. We cannot escape our huge debt burden. It is heavy, and soon it will come crashing down on us all.

    China most likely won’t help us – they are trying to SELL U.S. debt, or convert it to gold and silver. Japan is unable to do it. (They kind of have their own problems right now). The EU will be too busy bailing out the Eurozone to do anything for us.

    Who’s left? Our good old international loan shark friends, the World Bank and the International Monetary Fund? Maybe. They could bail out the U.S. They’re both experienced in bailing out countries like Argentina, Brazil, Russia, etc. – but they tend to charge high interest rates on their loan payments, and other conditional requirements which don’t make a country’s populace happy. The people have a tendency to protest and riot and throw Molotov cocktails when they hear about their government’s bailout proposals to the IMF or World Bank. They both will demand their pound of flesh. Perhaps this is when the nationalization of your 401(k) and mutual funds will come into play??

    Not good. Oh well… *sigh*

  • Jasper

    It has to crash and burn in order to be rebuilt. 12/21/12

  • Nick

    Many Mayan scholars are predicting the economy will crash between August 10-30. This coincides with the 5th night of the 9th underworld (god of destruction). The 5th night of the 8th underworld was Nov. 2007 to Nov. 2008 and we all know what happened then. The 5th night of the 7th underworld was from 1932-1952 (great depression, WWII, holocaust, atom bomb, cold war, Korea). Also, the Mayan calender ends October 28, 2011, not December 21, 2012. It all goes down this year folks!

  • Frank

    I like my facey-face. hahaha 🙂

  • Frank

    According to the New Yorkshire Times, the debt is predicated on the stupidity of the American people.

  • Frank

    5th night of the whatdy what? I got no time to worry about the rapture, I’ve got native girls to capture!

  • Steven

    I’m so sick of everyone blaming American’s…..The American economy is controlled by a private EUROPEAN CORRUPT BANK!!!! Europeans have been and will always be the problem LET THEM FALL and lets control our own economy. The federal reserve is owned by rothschild…If we vote Ron Paul for president he will get rid of the private bank and put the power to control the American economy back to the American people.

  • Rating Agencies and the actual crisis is only one thing….. A nice trick to make some countries pay huge interests for loans. Nothing else, they discovered a new way of making a lot of money. Portugal has no troubles on getting new loans, as long as paying 8% interest.. this is the point.

    We help Americans find jobs and prosperity in Asia. For details, visit

  • Richard

    The Fall of the US Empire / Roman Empire
    Say goodbye to the Republic
    -Decline in Morals and Values
    -Public Health
    -Political Corruption
    -Urban decay
    -Inferior Technology
    -Military Spending

  • what will happen economically to the world in the next few years will make 2008 look very tame. The general public in alot of these countries are aware of the dirty deeds of thier leaders and banks, and that is one reason riots and revolutions are spreading across the globe

  • 005

    It seems to be like the last straw just keeps trying to break. Yet it keeps building upon itself further and faster.
    How much crazier can it get? Much crazier.
    What else can you say?

  • blueuniform

    Everyone needs to understand one thing, the economic collapse of America in the end of 2008, was because of Obama being elected. As soon as it was clear that Obama was going to win, and be the next president, Wall St. and anyone with a brain, started running for cover, and taking their money with them. They all knew what a disaster a Muslim socialist would be, running (ruining) our country. During President Bush’s 8 years, we had a growing economy, jobs being created, and capitalism. Obama made no secret about how he was going to dismantle the things that made America great, and he is keeping his word. As much of a shrew as Hillary is, at least she is a citizen.

    • sricks

      Wow, that was awfully rude not to mention untrue. The scary part of all of this is that people feeling the way that you do even exist.

  • Codex

    The comments section seems to be full of conspiracy theorists and people proclaiming, ‘the end is nigh’. Of course things are bad but some objectivity and perspective would be nice, rather than lashing out in non-factual invectives against those ‘pinko, commie, atheist, liberal bastards’. Lol, some people are so simple… and so easily led.

  • Euro-Cassandra

    Europe is de facto already broke and it´s just a matter of time until the world takes notice. Currently, Germany, the Netherlands and Austria are trying to keep the Euro currency together, which will eventually lead to all Euro-countries going bankrupt. Interestingly, in recent weeks a vivid discussion has begun in Germany, whether one country (even if it is the biggest economy in the Eurozone) can take the burden of holding the zone together. As soon as Portugal collapses, Spain and France will follow suit. At the moment, our political “elites” are sacrificing their populations´ wealth for the Euro currency. The advantage: The political class will be wiped out as soon as the Euro collapses. The sooner the better…

  • Paul

    Who cares? I insulated my house to reduce fuel costs for a long time to come. Now I replace the lawn by veggies and fruits and berries. And I walk and cycle where I can. Still looking for a Chinese tricycle that can hold huge loads of stuff. Going into barter trade with my neighbors.



  • Randome-11

    The euro is going to bring the european union down.

  • Navodita

    Of course YES .. the present European Crisis is going to have a Trickle down affect on each and every country.. the affect may come down slowly but would be worst for the developing countries .. esp south Asian countries and African countries .. You can see that if this is having so bad effect on developed countries then it will surely worsen the financial as well as the political condition in various third world counties.. and Yes it is going to be very interesting to see how various governments respond to this crisis

  • Jack Jones

    March 29th, 2011 at 3:12 am · Reply

    Blame it all on Obama – what a load of Bull! Bush took the US into the Iraq and Afganistan wars which cost the country billions and now Obama is paying the debts! Was the failure of Lehman Bros Obama’s fault as well? Or was it the greed of the Capitalists? And why dont we blame the sins of Bernard Madoff on Obama! Bet Madoff made big donations to the GOP in his time – from stolen moneys !

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