Portugal, which is entering the last year of a three-year European Union aid program, will likely need further help from Europe at a time when core countries in the region, such as Germany, are fast losing enthusiasm about providing financing to ailing peripheral nations.
The most likely solution to this problem, according to analysts at Credit Suisse, isn’t a second bail-out but instead that European institutions offer Portugal a credit line until the country can make a full return to debt markets.
This is important because the strict budget cuts imposed as part of the EU-IMF aid package have begun to wear on the national psyche, triggering large demonstrations across the country in recent months as unemployment remains high and growth sluggish. Further unrest could spread across the region, fuelling further rebellion against bail-out inspired austerity.
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