European governments have been running through the classic five stages of grief as their debt crisis balloons. Now, it's Portugal's turn.
Like Greece and Ireland before, Portugal doth protest too much in saying it doesn't need a bailout, it's not looking for a bailout, and, damn it, Europe as a whole should be doing more to support its limp common currency.
"We are doing our job. Clearly, Europe is not doing its job to defend the stability of the euro," Portugal's Finance Minister Fernando Teixeira dos Santos said Monday.
That's denial and anger. Next come bargaining, sadness and acceptance.
Like Greece and Ireland earlier, there are few who don't believe Portugal's up next, that it's not just a matter of time. Portugal's not even the biggie here. The big fear is that Spain will be the next target of the markets.
"It now seems a matter of when, rather than if, Portugal will follow Greece and Ireland in accepting some form of European/IMF bailout," said economists Jonathan Lynes and Emilie Gay of Capital Economics. "But will this signal the beginning of the end of the euro zone debt crisis or the start of a new, more dangerous, phase? We fear it will be the latter."
Portugal, they noted, faces hefty debt rescheduling in the first half of the year. Having declined after the Irish bailout late last year, its borrowing costs have spiralled again.
While a bailout wouldn't be a huge thing - Capital Economics estimates Portugal would need about €45-billion to cover its needs for two years, less than either Greece or Ireland and easily covered by existing rescue funds - the key is whether it all stops there. That's not likely, according to the markets, anyway.
One wonders, too, how much more the Germans will tolerate. Footing a hefty portion of the bill, Germans are growing increasingly tired of bailouts. So where Portugal is concerned, it's largely more an issue of what any rescue would mean for the overall debt crisis.
"Germany and others will presumably hope that it will draw a line under the problems in the periphery," the Capital Economics observers said. "But there are two reasons to be skeptical. First, while the bailouts for the peripheral economies have addressed their near-term liquidity problems, there is a growing recognition that they do not address their fundamental solvency issues. As such, expectations that those economies will eventually need to default or 'restructure' their debts - with losses for private investors - are still rising."
There's also the issue of the big and the small. Aside from Belgium, whose issues are somewhat different because of a political stalemate, a bailout for Portugal would mark the last for the smaller euro economies. That would shift the focus to the bigger economies, notably Spain, which is on the radar, regardless.
"What started out as a Greek tragedy and turned into a tale of much more epic proportions may only just be nearing the end of Act 1," Capital Economics said.
According to news reports, European finance ministers plan next week to discuss the possibility of boosting the size of their rescue fund.
One test will come Wednesday when Portugal is scheduled for a bond auction.
Yields on Portuguese 10-year bonds eased a bit today, but were still just shy of 7 per cent, far too hefty a burden.
"The immediate speculation is that Portugal's bonds will not sell well at an auction of 10s planned for tomorrow," said chief economist Carl Weinberg of High Frequency Economics, citing an auction last week, on six-month paper, with a huge spread over German yields, which are the benchmark.
"The feeling is that if the 10-year auction goes as badly as the six-month auction, funding from the market will be simply unaffordable," he said.