Do these jeans make my debt look fat?" and other questions Portugal is asking

No one ever likes the question, "Do these jeans make my butt look fat?" 

The honest answer would be ,"No, its your butt that makes the jeans look bad". 

But we always smile and say "of course not", and let the poor girl try on 3 more pairs of jeans before she gives up and starts wearing sweats.

Portugal is still trying on jeans to avoid bailout or bankruptcy.  The problem is, as time goes by and spreads go up, the poor Portuguesa keeps getting fatter and fatter.

A Brussels bypass seems inevitable. 

Portugal is in serious denial as the cost of refinancing their debt goes up and up.  The cost of refinancing their debt is already above Ireland and Greece when they went to Brussels with their tin cup. 

With its 10-year debt trading close to the historic high of 7 percent reached last week, Portugal will try Wednesday to sustain what many have come to see as nothing more than a form of bond market charades when it attempts to raise up to €1.25 billion, or $1.62 billion, in long-term financing — debt that is expected to come largely from the country’s already depleted banking system.

For Portugal, as it was for Greece and Ireland before their bailouts, borrowing at such high rates from lower-quality lenders may demonstrate its economic sovereignty. But to an increasingly skeptical marketplace, borrowing on such terms reflects nothing more than the country’s unwillingness to accept the rude reality of its fiscal condition.

As a result, the Portuguese banking system takes on more debt, making it harder to restructure and thus requiring the government in Lisbon to impose more pain on its citizens, a dynamic that is now playing out in Greece.

“Eighty percent of Portugal’s debt stock is held by foreigners,” said Jonathan Tepper, an analyst at Variant Perception a research firm in London. “But the flow, now, is being financed domestically.”

As its interest rates moved above 6 percent, Greece bowed out of the markets and soon after had to accept a bailout.

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