Ex-BOE's Julius Says Portugal May Face 'Liquidity Assault'
(Bloomberg) -- Former Bank of England policy maker DeAnne Julius said Portugal may be the next country to suffer liquidity strains after the cost of Ireland's bank bailout forced it to request a European rescue package.
"Portugal is not Ireland, it doesn't have quite the same banking issues, but it does have many of the other issues," she said on The Pulse with Andrea Catherwood on Bloomberg Television Nov. 23. "When there is so much global liquidity looking for a home or looking for a vulnerability, I think that we're likely to see that liquidity assault shift from Ireland to Portugal."
Irish Prime Minister Brian Cowen is pushing a public austerity budget for 2011 after asking for emergency aid from the European Union and the International Monetary Fund two days ago. Debt costs for Portugal, which increased spending in the first 10 months and has barely grown in a decade, surged relative to German bunds Nov. 23.
"I suspect they will" also need emergency funds, Julius said.
The extra yield investors demand to hold Portuguese 10-year debt rather than German bunds jumped as much as 13 basis points today to 420 basis points. A basis point is 0.01 percentage point.