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Analysts Expect Portugal To Need EU Bailout

RENEE MONTAGNE, host:

NPR's business news starts with Europe's debt crisis.

(Soundbite of music)

MONTAGNE: European Union leaders are in Brussels, trying to hammer out a long-term solution to the continent's financial woes. Their efforts are being complicated by a crisis in Portugal, which could be the third EU country to need a bailout.

NPR's Philip Reeves reports.

PHILIP REEVES: Maybe it'll be next month. Perhaps it'll be two months after that. Analysts can't be sure. But most agree on one thing: Portugal, a small, Southern European nation perched on the edge of the Atlantic Ocean, is going under. It, too, will likely soon need to be bailed out with loans worth tens of billions of dollars, just like Greece and Ireland.

Portugal's been limping along for months now, burdened by a big budget deficit and a mountain of debt. Now it has another problem. On Wednesday, opposition parties in Portugal's parliament banded together and threw out the government's latest austerity package. The prime minister responded by resigning. Portugal will be in political limbo until a new government's elected.

The markets are taking the news badly. Already, high interest rates for Portuguese bonds rose to record levels, way beyond what Portugal can afford, making a bail-out even more likely.

Portugal's crisis is the talk of the EU summit in Brussels right now. But EU officials are dealing with a larger issue. They're working on a system they hope will enable troubled nations to ride out these storms. So far, they've agreed to put far more money into the EU's bail-out fund and to make that fund permanent. Officials hope this will silence those who've been declaring that, in the end, Europe's single currency is doomed to fail.

Philip Reeves, NPR News, London. Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Philip Reeves is an award-winning international correspondent covering South America. Previously, he served as NPR's correspondent covering Pakistan, Afghanistan, and India.