European Debt Crisis Morphs Into New Phase: Mohamed El-Erian

Portugal’s decision to follow Greece and Ireland in seeking a European Union-led bailout may mark a watershed in the region’s debt crisis. Instead of a falling domino that threatens to topple countries higher up the credit-quality ladder, the latest aid request will likely speed up the debt restructuring of the three countries in Europe’s intensive-care unit.

Portugal’s need for emergency assistance became inevitable last month once its parliament rejected the government’s plans for yet another round of austerity. Former Prime Minister Jose Socrates’s resistance to seek a bailout became untenable in the face of credit-rating downgrades, deterioration in market spreads and access, and the added balance-sheet strains on Portuguese banks.