Regions

Politics in Portugal Could Lead to Crisis

July 3
9:53 AM 2013

"Portugal is almost certainly going to become a crisis," noted Mint Partners Ltd. strategist Bill Blain. "When politicians walk away from government, you know a new election is coming. That's the point economic reform dies."

According to Bloomberg, swaps on Potugal's bonds jumped 105 basis points, shooting to 507, which is the highest level it has been since May 2010. The yield for the country's 10-year bond increased 8%, after the two ministers left the coalition government.

As a result of the splintering coalition, the country's budget became at risk as Portugal tries to meet the bailout program's terms. Other factors that drove up credit risk included the downgrade of European banks's ratings and unrest in Egypt.

Another Portuguese company, EDP-Energias de Portugal SA, saw its basis points jump to 392.5, an increase of 60 basis points. Banco Comercial Portugues SA climbed 47 basis points to 593, while Banco Espirito Santo SA was not a long way behind at 560, increasing by 44 basis points.

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