Portugal: A Bailout Is Just the Start

Another day, another downgrade. On Tuesday, Mar. 29, Standard & Poor's (MHP) lowered Portugal's debt rating for the second time in less than a week to BBB-, the lowest investment grade. Portuguese bonds were hammered, with the yield on its 10-year debt at one point climbing to 8 percent, its highest level since at least 1997, when Bloomberg began collecting data. The small, struggling nation seemed to take a step closer to seeking an emergency bailout, as Greece and Ireland did last year.

The latest crisis was triggered by the Mar. 23 resignation of Prime Minister José Sócrates, after Parliament rejected his proposed austerity measures. The political uncertainty in Lisbon makes its economic future much more certain. "I regard the Portuguese bailout as a given," says Jacob Funk Kirkegaard, an economist at the Peterson Institute for International Economics. "There's no way they're going to avoid it."