Portugal's economy: still scary

Portugal has looked increasingly in need of a bail-out. Firm demand for a bond auction this week cannot mask deep problems with its public finances

José Sócrates, the prime minister, said this week that Portugal’s 2010 budget deficit would fall “clearly below” the government’s target of 7.3% of GDP. Portugal was one of the few EU countries to cut its deficit by more than two percentage points in 2010, he said. Yet revenues booked from the transfer of Portugal Telecom’s pension funds to the state explain much of the improvement. The dilatory pace of fiscal consolidation is unlikely to assuage investors for long. The auction’s success may offer only temporary respite. Investors in the euro zone’s bond markets have seen the film before.