Wednesday, 6 April 2011

Not even Portuguese banks now want Portuguese government paper

The end draws nigh for Portugal just in time for the tourist season. No government, the country in electoral limbo, who can blame their banks? The way the system worked before was the Portuguese banks bought Portuguese sovereign debt as nobody else wanted it. They took it to the ECB who gave them Euros up to say 97% of the face value of the bonds. The Portuguese banks then 'lent' these Euros to the government to pay their payroll mainly.

So a lot of unpaid Portuguese and a downturn in tourism equals street protests and unpopular politicians. Barroso better stay in Brussels where he is safe from his own countrymen!

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