The Portuguese fallout

How much are we in for? That is the question that springs most readily to mind after Portugal’s request for fiscal aid from the EU. And, sadly, the answer is difficult to work out. The figures being spread around range from £3 billion to £6 billion, with valuations in between. But, really, it depends on how much of the €80 billion package is agreed to by European finance ministers, and which lending mechanisms are used. The European Stability Fund, the EU’s emergency fund and the IMF’s pot of gold all have differing levels of UK involvement.

If our country does end up making a significant contribution to any bailout package, then the government will certainly have some explaining to do. The main reason given for helping out Ireland, rather than Greece, was that they are a close trading partner of ours. Which is to say, Ireland is our 5th largest export market, while Greece is only 28th. But what about Portugal? It languishes, even less significant than Greece, in 29th place. UK concern will likely hinge on other factors — such as our banks’ exposure to the blast zone in Lisbon — but, whatever they are, those factors ought to be clarified by the government.

The coldest fear of all, now, is that the fallout will spread. We have seen the first three PIGS go the way of the begging bowl — might the fourth, Spain, soon follow? Their government has said, in unequivocal terms, that they will not. And, so far, the markets and money merchants appear to agree. Their hope is that Portugal will be the final domino to topple. But still brace yourselves, as it’s set to come to ground with a ear-splitting thud.