Greece, on the brink of a financial abyss, started dragging another eurozone country — Portugal — down with it, fuelling fears of a continent-wide debt meltdown. Standard & Poor’s on Tuesday downgraded Greek bonds to junk status and Portugese bonds two notches.
Greek and Portuguese stocks were down 6.7 per cent and 5.4 per cent, respectively, while their market borrowing costs went through the roof. The interest rate gap, or spread, between Portugese and benchmark German 10-year bonds rose about half a percentage point on Tuesday to reach its highest point since the euro came into circulation. The higher the gap, the less confidence in Portugal.