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Investors are increasingly worried about Portugal’s debt profile, as its economy contracts and the prospects of a Greek debt restructuring going smoothly shrink.While EU leaders have lauded Portugal’s performance to date at achieving the debt goals outlined in the terms of its bailout last spring, analysts remain sceptical that this progress can continue amid worsening economic conditions.
That’s being reflected in yields on Portuguese bonds today, which are hitting euro-era highs trading in the secondary market.
If Portugal fails to meet its goals and can no longer borrow money from the open market, it could be forced to restructure its debts. Worst case scenario is that this could set off a downward spiral that would spread across the eurozone.