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A broker watches a screen displaying financial information about turmoil in the Portuguese stock market and the sharp fall in Portuguese bank Banco Espirito Santo shares, in a trading room of a Portuguese bank, in Lisbon, Thursday, July 10, 2014.Francisco Seco/The Associated Press

Worries over the health of one of Portugal's largest financial groups hit the country's stock market hard Thursday and pushed up its borrowing rates.

The tensions are centred on the Espirito Santo group of companies, which includes Portugal's largest bank Banco Espirito Santo.

Share trading in the bank was suspended after a precipitous fall of more than 16 per cent, dragging the Lisbon stock exchange down more than 4 per cent and pushing up the yield on Portugal's benchmark 10-year bonds by 0.13 percentage points to 3.89 per cent. Sentiment was knocked across Europe, and the Stoxx 50 index of leading European shares was down 1.4 per cent.

The market moves provided an unwelcome reminder to investors of the tensions that gripped Europe for much of the past few years, when concerns over the state of the public finances in a number of countries that use the euro were at their most acute.

Portugal became the third euro-zone country after Greece and Ireland to require a financial rescue when it got a €78-billion ($106-billion) bailout in 2011. In return, successive governments have had to enact tough austerity measures, such as cutting spending and reforming the economy.

Portugal's efforts in recent years to get its public finances into shape have helped it regain the trust of investors. That was manifested in the fall in the interest rates the country pays on its borrowings. As a result, Portugal concluded its three-year international bailout program in May, with the government confident it can raise money in the markets.

The government insists Banco Espirito Santo is solid, but a parliamentary committee says it intends to call the finance minister and the governor of the Bank of Portugal to answer questions about the Espirito Santo group of companies.

Banco Espirito Santo is being engulfed by a cascade of bad news from other family group companies, and investors fear it is vulnerable. It is part of a banking dynasty dating back to the 19th century, and the Espirito Santo family is the bank's largest shareholder with around 25 per cent. The other shareholders include France's Credit Agricole, Brazil's Banco Bradesco and Portugal Telecom.

An audit requested by Portugal's central bank in May found "serious" accounting irregularities at Luxembourg-based Espirito Santo International, an unlisted holding company whose board of directors included Ricardo Salgado, chief executive of Banco Espirito Santo.

Investors fear the holding company's financial problems could contaminate other parts of the Espirito Santo group, including Rioforte, the group's non-financial holding company that manages assets in tourism and private health care among other interests, as well as the bank.

Portuguese banks recorded heavy losses during Portugal's bailout but passed the so-called "stress tests" demanded by the European Central Bank to assess whether they were sound.

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