Euro Zone Support for Portugal Debt Relief

Euro Zone Support for Portugal
Debt Relief

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As the Greek debt dilemma finds
resolution, currency traders wonder if there
will be similar Euro Zone support for Portugal
debt relief.

Both Greece and Portugal are part of the so
called PIIGS group.
Portugal, Italy, Ireland, Greece, and Spain all
have been in danger of defaulting on their
national debts.


The situation was sufficiently bad in Greece
that it required the largest government
bailout in history, cobbled together by the
various solvent members of the Euro
Zone, the European Central Bank, and the
International Monetary Fund.


In addition, private investors in Greek bonds
took a fifty percent reduction in bond value
and gave Greece longer to repay in return for
the country not simply refusing to pay.
The problem for the remaining PIIGS nations
will be getting credit at reasonable rates.


Anyone buying Portuguese bonds may be
thinking that in return for a few percent
interest each year they will be running the
risk of having their bonds written down by
fifty percent or losing their investments
completely.


Euro Zone support for Portugal debt relief will
be important in the country is to avoid the
debt default that many feared for Greece.


Then traders will want to consider what the
Euro Zone bailout package consequences will
be for other nations.


Portugal, Recession, and Its Debt Burden
The country of Portugal has a continuing
recession with a one percent drop in GDP in
2011.


It is expected to have as much as a four
percent drop this year and perhaps another
two percent in 2013.
With the Greek scenario as a
backdrop, Portugal will have trouble finding
any private lenders to help it out.


Although economists expect Portugal to
emerge from its recession within five
years, that does not encourage investors at
this point.


Thus Euro Zone support for Portugal debt will
be critical in the coming years. If the solvent
so called core group of European Union
nations are willing to support Portugal in the
coming years it will likely emerge more
fiscally sound.


However, it will probably not get any debt
relief from European Central Bank loans but
rather need to pay back every Euro.


In addition, the austerity measures taken on
by nations across Europe may well lead to a
recession in the European Community in the
year or so to come.


This would simply make things worse for
Portugal and the other nations struggling
with their debt burdens.


Trading the Euro
It appears that the European Union is not
going to break up, as some feared a year or
more ago.


However, fears of a “domino effect” of debt
defaults from Italy to Spain to Portugal to
Ireland and back to Greece still concerns
traders and investors.


The answer for the currency trader, in this
situation likely lies in how the European
Central Bank is dealing with the generalized
debt dilemma.


The European Central Bank seems to be
following the lead of the United States
Federal Reserve in that they are printing
money in order to pay off debts, prop up
banks and the credit system, and stimulate
the various economies.


This approach may well pay off in pulling the
Euro Zone out of its economic funk.
However, the cost could well be a devalued
Euro.
However, if you expect to see a fall in trading
the Euro, look at who else is printing money
to stimulate economies these days.


The dollar and Yuan could fall as well.
As always don’t trade currencies unless you
understand what you are doing and always
do your homework.


For more insights and useful information
regarding the Forex markets and foreign
currency trading, visit
www.TheForexNittyGritty.com.

Euro Zone Support for Portugal Debt Relief

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Euro Zone Support for Portugal Debt Relief