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Portugal “catching up with Italy in the doom loop”

Portugal’s wildfires failed to ignite much interest in the British tabloid press but the country’s economic situation is providing ‘doom-laden’ copy, suggesting we are “gaining on Italy” in a “shocking graph” on banking weaknesses.

According to the Daily Express, it is called the ‘doom loop’ – a measure of fragility associated with weak banks beset by bad loans, and financially-strapped governments.

Quoting financial website zerohedge.com, the Express explains that Portuguese banks have “stocked up on government debt over the past two years at a speedy rate”.

If they continue at the same pace, they will be “in the same position as Italian firms by 2018” – and that is not good.

Says zerohedge, Italy as a debt-to-GDP ratio of 135% (Portugal’s is 129%), and the ‘doom-loop’ shows no signs of turning any positive corners.

In essence, what the Express and zerohedge are saying is that Italy, Portugal (and also Spain) are racing in the wrong direction, potentially leading to “ANOTHER financial crisis for the bloc” (Express) and, worst case scenario, “reviving speculation of a Eurozone breakup” (Zerohedge).

National papers, too, are full of Portugal’s banking woes, constantly upgrading on the billions failing banks have cost the country.

At the beginning of the summer (June), the five major banks were being credited with losses of over €17 billion in credits over the last five years and, by this month, their results had further deteriorated by €680 million (dinheirovivo.pt).

On the political front, Portuguese prime minister António Costa is due to travel to Paris next week for a meeting of Social Democrat leaders, presided by French president Fraçois Hollande.

A source has explained that the meeting, which will include Greek prime minister Alexis Tspiras, is designed to “define common lines and positions” ahead of the Bratislava Summit, scheduled for September.

Europe’s social democrat leaders are expected also to discuss “the political situation in Europe” post the result of the Brexit referendum in UK.

natasha.donn@algarveresident.com