Contagion on the run

April 27 (Bloomberg) -- Portugal risks becoming the new Greece.
With a higher debt burden and a slower 10-year growth rate than Greece, Western Europe’s poorest country is being punished by investors as the sovereign debt crisis spreads. The risk premium on Portuguese bonds rose to more than double the past year’s average this month. Portugal’s credit default swaps show investors rank its debt as the world’s eighth-riskiest, worse than for Lebanon and Guatemala...--
Full text
Comment: Part of the reason why contagion is spreading is the ongoing uncertainty about a bailout of Greece. For the financial markets, it would have been better if from early on a clear signal were given of either a bailout or a non-bailout. Financial markets hate uncertainty more than bad news. Although there was signaling that in the end a bailout would happen, the signal was too weak and sent with too little conviction so that the financial markets did not get the message. On the other hand a weak signaling was necessary in order to prepare the debtor countries for the coming of hard austerity measures.