Portugal lines up to be the next euro-domino to fall.
Portugal is under pressure from Germany and France to accept an EU bailout package, according to anonymous sources cited by Spiegel, Agence France-Presse and Reuters. Portugal, Germany and France all vehemently deny this, and the whole situation is beginning to look like a repeat of what happened in Ireland.
If Portugal falls, the European Union can bail it out. But Spain, Italy and even Belgium are also at risk. Spain’s economy is twice the size of Portugal, Ireland and Greece put together. The EU can’t afford to bail out the bigger countries.
Spiegel and Reuters report that Europe is pushing Portugal to accept a bailout early in order to minimize the risk of the problem spreading to Spain—just as it did with Ireland last year.
“Before a bailout for Ireland was finally confirmed we had a lot of official denials,” said ifr Markets’ Divyang Shah. “We now seem to be repeating the same script for Portugal.”
“There is a lot of pressure on Portugal,” afp quoted an anonymous diplomat as saying. “Every European country wants Portugal to make more budget savings than planned, and several countries want it to ask for external financial aid.”
“I think everybody is bracing for an aid request (from Portugal),” the diplomat said.
Portugal could run into trouble as soon as Wednesday. The government plans on raising €1.25 billion (us$1.62 billion) at a bond auction. If it struggles, a bailout will probably not be far away.
And even if it doesn’t, Portugal has to raise €20 billion (us$26 billion) this year.
“Perhaps more interesting is the market’s attitude to Spanish and Italian paper on Thursday; this will be a truer test of whether or not contagion is getting a grip,” said analyst at Rabobank International Jane Foley.
Both Italy and Spain will be auctioning debt on Thursday. If investors are worried that these auctions too will fail, the eurozone could go into crisis mode.
The current euro system is simply not sustainable. Portugal is poised to be the next domino to fall, and there will be more. As the Trumpet has often pointed out, the current euro system was designed to fail right from the start.
But that doesn’t mean the euro is finished. As the crisis becomes more acute in 2011, expect a radically revamped eurozone to emerge, where 10 nations will unite in the kind of fiscal and political union necessary to maintain a common currency.
Bailouts simply stave off the inevitable redesign of the euro.
The importance of the revolution that is coming in Europe cannot be overstated. As Trumpet editor in chief Gerald Flurry wrote recently, “We are witnessing one of the most significant moments ever in the history of Europe.”
“Unless Germany rescues Europe, the Continent will collapse as a political and financial union,” he wrote. “This is exactly what Herbert W. Armstrong warned would happen—as far back as the 1940s: that a massive financial crisis would give Germany the opportunity to shape a United States of Europe!”
He continued: “Watch closely. Germany will use this crisis to force Europe to unite more tightly. In the process, some eurozone countries will be forced out of the union. When that happens, the pundits will say European unification is dead, that the European Union has failed. Don’t listen to them!
“Every country that leaves the EU puts us one step closer to seeing the German-led 10-nation European superstate!”Portugal’s travails signal the arrival of a unified European superstate. For more information, see Mr. Flurry’s article “A Monumental Moment in European History!”