Eurozone: Portugal's borrowing costs soar

Portugal's borrowing costs soar as France passes first bond auction test - Telegraph: "Yields on benchmark 10-year government bonds rose nearly 2.3pc, or 228 basis points, to 14.198pc in afternoon trade. The difference between Germany and Portugal's borrowing costs also widened to record highs of 1,243 basis points, following S&P's downgrade of Portugal to below investment grade. . . .The Bank of Portugal has forecast GDP growth to shrink by 3.1pc in 2012, compared with previous estimates of a 2.2pc contraction."

So we have escalating borrowing costs, austerity policy, and economic contraction.  Sounds like a recipe for disaster.

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Eurozone: austerity equals contraction

After the downgrades, now what for the Eurozone? Obviously, Merkel is still "out to lunch:"

Merkel says eurozone must act fast - FT.com: "German chancellor Angela Merkel has called on eurozone governments speedily to implement tough new fiscal rules after Standard & Poor’s downgraded the credit ratings of France and Austria and seven other second-tier sovereigns."

In other words, more "punishment" for the non-German Europeans (Greece, Italy, Spain, Portugal, Ireland, et al). How much more they can take only time will tell. But the inescapable truth is that the policy of austerity is a disaster. Austerity = Contraction. And Europe will continue spiraling down . . .

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