Eurozone Crisis Worsens On Portugal Deficit, Irish Bank Tests

The sovereign debt woes in the eurozone have intensified as Portugal reported a budget deficit for 2010 well above the target level, while stress tests for Irish banks showed a massive capital shortfall, according to Bloomberg. On Thursday, Portugal reported that its budget deficit for 2010 was 8.6% of gross domestic product, which is more than a full point above the 7.3% target that had been set by the government. The data increases the pressure for the country to seek international aid as borrowing costs surged on concerns that the target for a deficit of 4.6% of GDP for 2011 will not be reached. Giada Giani of Citigroup warned that Portugal “is probably unable to access markets in the next few weeks and will probably need a bailout.”

Meanwhile, the Central Bank of Ireland announced that the latest stress tests of the Irish banking system showed that the leading four banks would need to raise an additional €24 billion in capital. The results showed a capital shortfall of €13.3 billion for Allied Irish Bank and that the Bank of Ireland would need an additional €5.2 billion. Irish Life & Permanent and EBS Building Society need to raise the remaining €5.5 billion. Additionally, the country’s finance minister, Michael Noonan, unveiled a plan to Allied Irish and EBS that would see Irish Life sell its life assurance and investment management units and leave the government with a majority stake in the company.

Click here to read the story on the Portuguese deficit from Bloomberg News.

Click here for coverage of the Irish stress tests from Bloomberg News.