Ireland, Portugal on the Blink

The US stock futures took a dump as the spectre of 'congation' from Ireland spreads from Europe.

In case you aren't aware, the sovereign debt crisis of Europe has never gone away, and now it's Ireland's turn. Portugal is not far behind, neither is Spain.

Ireland has been told to accept EU or IMF bailout within 24 hours or risk triggering 'contagion' into vulnerable countries like Spain and Portugal.

UK's Guardian reports:

An increasingly isolated Irish government was coming under mounting pressure tonight to seek an EU or International Monetary Fund bailout within 24 hours amid fears that contagion from its crippled banking sector might spread through the weaker eurozone countries.

Portugal, Spain, the European central bank and opposition parties urged Brian Cowen's coalition government to remove the threat of a second crisis in six months by putting a firewall between Ireland and its 15 partners in the single currency.

With finance ministers from the eurozone due to hold emergency talks tomorrow night, financial markets were expecting Dublin to finalise negotiations with the EU over the terms of a deal to allow Ireland to rescue banks laid low by the collapse of the country's construction boom.

But the 'contagion' seems to have already spread, as UK's Telegraph reports:

Fernando Teixeira dos Santos, the Portuguese Finance Minister, has warned that the fall out from concerns over Ireland's public finances could create a contagion effect among its neighbours.

"The risk is high because we are not facing only a national or country problem," he told Dow Jones news wires, in reference to the possibility that Lisbon will need international financial assistance.

“It is the problems of Greece, Portugal and Ireland. This is not a problem of only this country. This has to do with the euro zone and the stability of the eurozone, and that is why contagion in this framework is more likely.

“It is not because markets consider we have similar situations. They are only similar in what concerns markets, but as I said they are very different.”

He added: “Markets look at these economies together because we are all in this together in the euro zone, but probably they could look different if we were not in the euro zone.

“Suppose we were not in the eurozone, the risk of the contagion could be lower.”

Hmmmm....I hope it is just a matter of translation from Portuguese to English, but the Portuguese Finance Minister's reasoning is as sharp as a rusty razor to shave a belly of a drunken sailor. Yes, Minister, if your country were not in the eurozone (as it shouldn't have been), of course there would be no contagion of Euro crisis. (Oh boy.)

Ireland does not want EU/IMF bailout. Portugal does. Like it or not, Ireland may be forced to accept a bailout.

What a coincidence that the euro sovereign debt crisis flares up just as the Federal Reserve's QE2 starts. There's no sign of the ECB printing money to provide liquidity. It looks like Ben can print a whole lot more to rescue the euro zone, again.

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