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Portugal 'headed towards a default'


European Union leaders meeting in Brussels have warned that Portugal still needs to make big cuts in spending and reduce its debts. Earlier this week, the Portuguese government collapsed, increasing fears that the country will follow Greece and Ireland in seeking a multi-billion euro bailout.

Wolfgang Munchau, correspondent at the Financial Times, believes that serious political opposition to bailouts is growing in creditor countries like Germany, France, Finland and the Netherlands.

"The the minute a country pays for another country there will be so much hostility in the creditor country that the politics of this will become impossible...

"This leads me to believe that we are headed towards a default."

Andrew Balls, head of European investments at the world's largest bond traders, Pimco, told the programme that eurozone countries face "weeks of ongoing uncertainty".

"Portugal has essentially lost access to financial markets," he said, making it more difficult for the country to meet repayment deadlines coming up in the next few months.

And he added that it was "hard to see significant default risk" in United Kingdom, the United States and Japan, all of which have their own currencies, their own central banks and more flexibility over financial policy.

But Duarte Pacheco, a Portuguese MP from the opposition Social Democratic Party, told Today presenter Evan Davis that there is still a chance, if his party wins the coming election, that a bailout will not be required: "We hope that if we get confidence of the markets and if we show to the people and to the markets that we will take the measures that the country needs, maybe we'll not need it."

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