Portugal is bracing for an increase in speculative trades against it as some investors expect it to be the next European nation to need a bailout now that Ireland is taking a massive loan to prop up its banks.
During the past decade of meager economic growth of around 1 percent a year, the Portuguese have been living beyond their means, borrowing money to finance sacred welfare entitlements and private spending while protecting jobs through outdated labor laws that ignored changes in market conditions.
International investors, spooked by the scale of Greece's bailout requirements in May and Ireland's banking failures, are taking a closer look at the finances of eurozone countries and they don't like the look of Portugal's accounts, says Emilie Gay, an analyst at Capital Economics in London.
Investors are "looking for their next target" and Portugal fits the bill, Gay said Monday. Capital Economics predicts Portugal will have to ask for help by early next year, when it has to begin refinancing billions of euros (dollars) in government bonds. Others predict the crunch may come sooner.