It is as if Europe is trying to kill the Euro (just as we predicted): the FT reports that according to Fernando Teixeira dos Santos, Portugal's finance minister, the risk that Portugal will have to turn to the international community for emergency financial assistance is high because of the growing dangers of contagion through financial markets that fear the eurozone debt crisis will spread. "The risk is high because we are not facing only a national or country problem. It is the problems of Greece, Portugal and Ireland. This is not a problem of only this country." And just to make it appear sightly less palatable that Portugal is now pointing a loaded gun at its head, dos Santos threw a little of the blame all around: "This has to do with the eurozone and the stability of the eurozone, and that is why contagion in this framework is more likely. It is not because markets consider we have similar situations. They are only similar in what concerns markets, but as I said they are very different. Markets look at these economies together because we are all in this together in the eurozone, but probably they could look different if we were not in the eurozone. Suppose we were not in the eurozone, the risk of the contagion could be lower." And while we are on the daydreaming page, suppose the Euro did not exist: things may have been just a little different, roughly in line with what the euroskeptics have been saying for almost two decades now. Suppose the Fed did not exist either...
Some more amusing clips from dos Santos via the FT:
Mr Teixeira Dos Santos also said that the average cost of borrowing for Portugal was 3.6 per cent. If rates stayed the same for the next three years, then the average cost of borrowing would increase to 4.9 per cent, he added – lower than the expected cost of borrowing of 5 per cent for a country that uses the EFSF.
Portugal does not need to tap the markets again for medium- or long-term bonds until the start of next year, although it has two large debt redemptions in April and June. This means that ideally it should start borrowing again from the markets in January to make sure it has the money to refinance these loans.
And what would a Portuguese statement be without the wanton soccer reference:
The finance minister also stressed that European policymakers needed to improve their communication to markets and investors to prevent undermining sentiment and sparking sharp sell-offs.
“Our budget proposals were positively received by the markets, then things were reversed because of the uncertainty around the permanent mechanism for dealing with bail-outs,” he said, referring to the European summit on October 29, when plans for a rescue mechanism to succeed the existing European Financial Stability Facility were outlined in a Franco-German initiative.
“We were like the soccer player running to the goal and ready to kick for the goal, and then someone fouls us . . . but this time there was no penalty.”
Don't worry, with Ben Bernanke as the head referee, there will be no penalty ever again.