European debt crisis focus shifts to Portuguese-Spanish debt alarm

Euro zone's "confidence war" is not good Wang Jing reporter Wang Jing comprehensive report Ireland's financial aid applications to the European Union and the International Monetary Fund have been approved, but the eurozone countries ' debt problems have not been eliminated and markets are beginning to worry that Portugal, Spain and even Italy will soon follow Ireland's footsteps. A nationwide strike in Portugal 24th brought new resistance to the government's overhaul of its finances; The Spanish stock market fell 5.64% on 22nd and 23rd for two consecutive days, with the difference between its 10-year Treasury bond and Germany's 10-year Treasury note hitting its highest level since the euro was issued.　　All this has deepened market anxiety.　　Some analysts believe that the current credit crisis is spreading rapidly across Europe, even if no euro-zone countries apply for aid, bailing out Greece and Ireland to bring economic growth pressure to the eurozone will still exacerbate market anxiety.　　Portugal next year or apply for aid there is a view that the effect of Ireland's aid, contrary to expectations, has not only eased market concerns, but has also spread investor tensions to Portugal and Spain, which also have debt problems. Portugal's problems, the 10-year bond interest rate Rose 23rd further, from 22nd 6.8% to 6.9%; Portugal's main stock index fell 2.2% on 23rd.　　In addition, statistics show that Portugal's public spending rose 2.8% per cent in the first 10 months of this year. Portuguese President Anibar Cavaco Silva and Prime Minister José Sócrates have denied rumours that Portugal might be applying for aid.　　Silva said that Portugal's situation is markedly different from that of Ireland and Greece, with no crisis in its banking system, no real estate bubble, and only a middle level of public debt among EU countries. Analysts said that Portugal's ability to achieve fiscal retrenchment this year is the key to whether or not to apply for aid.　　Portugal is likely to apply for assistance in the first quarter of next year, at least € 50 billion, as Portugal is due to pay for a € billions of bond maturing next April. Portugal's economy fell after the financial crisis, with fiscal deficits of 9.4% per cent of GDP in the 2009 fiscal year, well above the EU's 3% per cent ceiling, the fourth highest in the eurozone following Greece, Ireland and Spain. The Portuguese government hopes to reduce the ratio to 7.3% by fiscal year 2010.　　According to data, Portugal's public debt accounted for 86% of GDP this year, and the market estimate could be more than 100% per cent. Portugal's 2011 Budget shows that fiscal tightening includes tax increases from next January, cuts in public service salaries, a freeze on pensions, and increased transparency in public spending. The Portuguese Parliament is scheduled to vote on the budget on 26th, and the analysis holds that even if the budget is passed, it will face enormous resistance.　　Portuguese citizens have held a 24-hour nationwide strike to protest the government's tightening policy. Spanish government bonds to raise money 32.6 by issuing 3-month and semi-annual government bonds 23rdBillion, but the cost of distribution is greatly improved.　　The yield on the 3-month Treasury note rose from 0.951% to 1.743% on October 26, and the yield on the semi-annual Treasury bonds increased from 1.285% to 2.111% per cent. Yields on Spain's 10-year Treasury note rose to 4.9% 23rd, with yields on 10-year Bunds reaching 237 basis points, the highest level since the euro was issued. The yield on Spain's 3-year bond is now 3.4%, close to 3 times times that of Germany's bond yield of 1.16% per cent.　　Spain's 3-month and semi-annual Treasury yields, which were issued on that day, were also nearly one-fold higher than they were last released. Spain's borrowing costs have soared to dangerous levels and are facing the risk of a repeat of Greece and Ireland, the Wall Street Journal Analysis said. The rising cost of borrowing, if it is beyond its affordability, will force Spain to seek foreign aid.　　Many of Europe's banks that hold large amounts of Spanish debt will have to bear the losses if investors think the rescue is unrealistic and requires Spain to restructure. In addition, the Spanish Iberian stock index fell 3.05% on 23rd, the biggest drop since August 11, after the news of Ireland's bail-out.　　The Iberian index has fallen 10.2% per cent since November.　　Confidence in the eurozone, which is hard to recover from the debt problems of Portugal and Spain, has plunged the euro into a slump, with the euro falling below $1.34 for the first time in nearly two months on 23rd. Some analysts believe the market's fears are spreading, and that the eurozone's overall fears will continue to worsen once Portugal and Spain are in need of aid.　　Europe's debt crisis is not a country's problem, and Europe needs a systematic solution.　　The Bank of Tokyo-Mitsubishi's analysis said that even if no eurozone countries needed assistance, the necessary measures to restructure the eurozone's internal imbalances would also lead to deflation, and its adverse effects would quickly be reflected in the euro zone's sluggish economic performance. Charles Dubert and David Pecs, an analyst at Lloyds Bank, also said the market had little confidence that aid could solve the debt crisis. As the current market trend directly affects economic decision-making, if the credit crisis spreads, it will pose a big threat to Europe's entire financial system.