By Claire West

The Portuguese government has denied that it needs a European Union led bail-out and instead called for confidence in its economy. Nevertheless speculation is growing that Portugal is struggling to cope with vast public debts.

The EU already had to bail-out Greece and the Irish Republic, and speculation is growing that Portugal will be the third country to need financial support.

The markets are still trading nervously as rumours abound regarding the need for Portugal to follow the Irish Republic and receive a bail-out. Despite the Portuguese government making public denials, the yields on Portuguese’s bonds continue to rise, a key indicator of loss of confidence in a sovereign state.

Mark O’Sullivan, Director of Dealing at Currencies Direct, comments, “As with Ireland, public government denials do very little to calm the markets, it’s the bond markets that reveal all and as confidence fades away and yields rise, a bailout becomes inevitable - you cannot outrun the markets.”