Moody's on Tuesday became the first rating agency to cut Portugal below investment grade. The 10-year Portuguese government bond yield leapt more than 1 percentage point to a new high. Slow growth and administrative problems were cited as the reasons why the deficit will not shrink as demanded by the bail out plan. Just as in Greece the indigenous tax avoidance culture will ensure the deficit continues to grow.
In Greece the demand from the Germans to run an East Germany type takeover is causing deep resentment. Greeks well remember the German occupation of Greece in WW II. They don't want another dose of German rule at any price. The government will fall on this issue.
Meanwhile back in the UK in a Newsnight interview with Paxo the useless UK Transport minister Hammond admitted that if he awarded the train building contract to Bombardier the EU would step in to stop him signing the contract. Nice to have EU power in the UK so brazenly admitted but it opens up the question why do we bother with UK ministers at all?
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