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Portugal: The next Greece? What you need to know

Could we see a repeat of the brinkmanship which caused turmoil on European markets during the Greek crisis earlier this year, but this time in Portugal.

A new socialist party led government which opposes austerity sounds all too familiar. Simon Fasdal, Head of Fixed Income at Saxo Bank, assesses the risk for bond and equity markets, given the change in Portuguese political landscape.

It's worth noting that Portugal is far from being a Greek situation. The economy has been improving since a low of 2009 when GDP was -4.2%:

• Gdp is now growing at a normal level of 1.5%

• Unemployment rate is down from nearly 18% to 12%.

Portuguese government bond yields are currently raised, as investors demand an extra risk premium for holding these assets. ECB bond buying is initially working against any initial panic. However, markets are naturally sensitive to political uncertainty and Simon details the signs to look for in equity markets if the risk of contagion threatens.

02:49 minutes
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