...and will Spain be next?
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Fears were growing last night that Spain could be next in line for a humiliating European bailout as it emerged that Britain could face a ?6billion bill to rescue Portugal.
George Osborne and his European counterparts are gathering today in Budapest, the Hungarian capital, for crisis talks after debt-stricken Portugal finally issued a formal request for help.
The Chancellor last night insisted that Portugal?s fate demonstrated that Britain would be ?playing Russian roulette? with the economy if it did not press ahead with painful spending cuts and tax rises to restore the public finances to health.
The pain in Spain: Spanish students clashed with police during demonstrations in Madrid last night. Youth groups are protesting Government austerity measures aimed at bringing down the national debt
But there was a furious response from Eurosceptic Conservatives at the prospect of British taxpayers being dragged into the Portuguese bailout.
Treasury sources confirmed that Britain could be required to give a multi-billion pound guarantee to pay off Portugal?s loans under the terms of a deal signed by Labour Chancellor Alistair Darling in the days after his party lost the General Election, but before the Coalition was formed last May.
Ugly scenes: A protester blocks the traffic with a vandalised road sign in the centre of Madrid during last night's clashes
The Tory leader in Brussels, Euro MP Martin Callanan, insisted the UK should play no part in the bailout and claimed the legality of the EU agreement was ?highly dubious?.
Some experts warned that the much bigger Spanish economy could be the next target for the markets.
Joe Rundle, head of trading at ETX Capital, a City trading house, said: ?It?s all about Portugal today, but by tomorrow, it?ll be Spain, then Italy perhaps. The phrase being used about Spain is ?too big to fail, too big to bail?.?
Spain?s economics minister, Elena Salgado Amid, insisted a bailout was ?absolutely ruled out?.
Portugal is today expected to submit a detailed request for a rescue package of between ?65billion and ?75billion. Treasury sources said the UK was not planning to offer any direct loans to Portugal.
But they confirmed that Britain could be required to guarantee a loan of up to about ?4.4billion ? 13.6 per cent of an EU bailout fund ? as well as 4.5 per cent of an IMF loan to Portugal, which could take the total to ?6billion.
The Treasury stressed that Britain would only end up having to pay out any money if Portugal defaulted on the loan.
The financial chaos engulfing Portugal could trigger a fresh wave of painful losses for British banks.
Experts say the Portuguese state will have no choice but to renege on its debt because the country?s bail-out is unlikely to be comprehensive enough to shore up its battered finances.
A default would crystallise damaging losses for British lenders, which have loan books totalling ?15billion in the crisis-torn nation.
Jonathan Loynes, of Capital Economics, said there was a ?strong likelihood? Portugal will have to ?restructure? its debts in 2013, meaning creditors won?t get repaid in full.
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ah ffs
Fears were growing last night that Spain could be next in line for a humiliating European bailout as it emerged that Britain could face a ?6billion bill to rescue Portugal.
George Osborne and his European counterparts are gathering today in Budapest, the Hungarian capital, for crisis talks after debt-stricken Portugal finally issued a formal request for help.
The Chancellor last night insisted that Portugal?s fate demonstrated that Britain would be ?playing Russian roulette? with the economy if it did not press ahead with painful spending cuts and tax rises to restore the public finances to health.
The pain in Spain: Spanish students clashed with police during demonstrations in Madrid last night. Youth groups are protesting Government austerity measures aimed at bringing down the national debtBut there was a furious response from Eurosceptic Conservatives at the prospect of British taxpayers being dragged into the Portuguese bailout.
Treasury sources confirmed that Britain could be required to give a multi-billion pound guarantee to pay off Portugal?s loans under the terms of a deal signed by Labour Chancellor Alistair Darling in the days after his party lost the General Election, but before the Coalition was formed last May.
Ugly scenes: A protester blocks the traffic with a vandalised road sign in the centre of Madrid during last night's clashes The Tory leader in Brussels, Euro MP Martin Callanan, insisted the UK should play no part in the bailout and claimed the legality of the EU agreement was ?highly dubious?.
Some experts warned that the much bigger Spanish economy could be the next target for the markets.
Joe Rundle, head of trading at ETX Capital, a City trading house, said: ?It?s all about Portugal today, but by tomorrow, it?ll be Spain, then Italy perhaps. The phrase being used about Spain is ?too big to fail, too big to bail?.?
Spain?s economics minister, Elena Salgado Amid, insisted a bailout was ?absolutely ruled out?.
Portugal is today expected to submit a detailed request for a rescue package of between ?65billion and ?75billion. Treasury sources said the UK was not planning to offer any direct loans to Portugal.
But they confirmed that Britain could be required to guarantee a loan of up to about ?4.4billion ? 13.6 per cent of an EU bailout fund ? as well as 4.5 per cent of an IMF loan to Portugal, which could take the total to ?6billion.
The Treasury stressed that Britain would only end up having to pay out any money if Portugal defaulted on the loan.
The financial chaos engulfing Portugal could trigger a fresh wave of painful losses for British banks.
Experts say the Portuguese state will have no choice but to renege on its debt because the country?s bail-out is unlikely to be comprehensive enough to shore up its battered finances.
A default would crystallise damaging losses for British lenders, which have loan books totalling ?15billion in the crisis-torn nation.
Jonathan Loynes, of Capital Economics, said there was a ?strong likelihood? Portugal will have to ?restructure? its debts in 2013, meaning creditors won?t get repaid in full.
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