Now that Jose Socrates has resigned from his position in Portugal, it would appear that until their are elections in the country, there is no government , so no mechanism to ask for a bailout, even if they want one.
Once again, S&P (Standard and Poors) have downgraded Portugal again. This is twice in one week, they now have a rating BBB-, three steps below Ireland. (Source - Bloomberg news)
Greece and Ireland were already in debt, which is why they asked for their bailouts. Now they are borrowing money at such high rates, it is becoming obvious that they will inevitably end up in the long term with even bigger debts with a much higher chance of default. (One of the reasons Ireland is desperate to renegotiate terms with the EU). With this in mind, it may be one of the reasons that Portugal is resisting the idea of asking for a bailout.
Richard Salgado,(Chief Executive of Banco Espinto Santo) said that he is not convinced that Portugal should ask for a bailout. "The general opinion is that Portugal will follow the bailout. I am not so sure" (Interview - Wall Street Journal). Following Jose Socrates resignation, elections are due shortly in Portugal and Mr Salgado is convinced that the polls would produce a government that would continue to try and improve Portugal's situation.
Other economists have said that, when the euro zone countries were getting into debt, there should have been a plan ready then to help them. By waiting until the debts for Greece and Ireland had got to the point that a bailout plan was necessary, the plans drawn up were shortsighted and seem to be leading them into more problems. The rates that they are having to pay are so high, it is almost inevitable that these countries will just be riddled with more debt and no where to go.
The EU have now agreed a permanent $700 billion rescue fund to try and contain the continent's crisis. However, Chancellor Angela Merkel of Germany said. "This doesn't mean the ESM is something we want to be used all the time, quite the contrary." she continued "We just want to demonstrate that we are well prepared."(Source - The L A Times)
The bottom line is that economies like Germany are doing well, they will be putting the monies into the fund. As she found out at the weekend by losing seats in local elections, her people are not so keen to bail out other failing economies. Britain's Prime Minister, David Cameron told the United Kingdom Parliament this week, they will be helping this time, but that they have informed and got agreement with the relevant bodies they will no longer be liable after 2013. in fact, had the previous government not already tied them in to this plan, he would have argued that they would not be liable at the present time. ( Source - BBC Parliament Channel)
Other countries that do not have the euro may well feel the same. The big problem I see coming whilst watching and listening to the economists and the markets, they are all wondering just what is going to happen should Spain begin to look like it may need help. Spain is a big country in the euro zone, which if it should go the way of Greece, Ireland and probably Portugal, it will be a big worry. I am sure that this is why the EU has started to get it's act into place. The Euro lovers have no intention of letting their pet project fail.
We ordinary people have no option but to wait and see how this plays out.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of DigitalJournal.com