On Wednesday Portugal is going to try to raise 1.25bn Euro by auctioning off government debt - selling bonds. This is perfectly normal practice and certainly we have had to do a lot of it to fund our deficit in recent years.
The interesting point though has been commented here before, but worth an update. Current bond yields on 10year Portuguese debt is 7.16% i.e. they need to offer a 7.16% rate of interest to sell their debt. Compare this to Germany's rate of 2.87% or our current rate of 3.52% - a little maths will show that Portugal will pay 0.895bn in interest on this debt sale over it's life, where Germany would pay 0.036bn and UK 0.044bn.
Portugal have to offer a higher rate of interest as they are perceived to be higher risk, but the problem is that the higher rate of interest itself could be just the trigger that prevents their economy from coping & of course if they can't cope then they will have to go the same way as Greece and Ireland in taking a loan from the EU/IMF that will come with some very unattractive terms. And then you have the bigger question - how much cash does the EU & IMF have to lend. If Portugal needs a load of money on top of recent big spends, they would be near out of money, and then if Spain needed help.... Not sure where that would leave us - certainly a global crisis to match that of 2008 - and the consequent pain that we are all experiencing as a consequence of that.
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