Quantcast
Get breaking news alerts via email

Click here to manage your alerts
A broker stretches as he talks on the phone in a trading room of a Portuguese bank in Lisbon, Thursday, July 10, 2014. Share prices on the Lisbon stock exchange fell more than 4 percent and Portugal's bond yields ticked higher amid growing concern about the health of one of the country's largest financial groups. (AP Photo/Francisco Seco)
Portuguese bank fears rekindle Euro market tension
Markets » Stock, bond prices fall, gold rallies as investors seek safe havens.
First Published Jul 10 2014 12:39 pm • Last Updated Jul 10 2014 05:03 pm

Lisbon • The specter of Europe’s financial crisis is back to haunt investors.

Worries over the health of Portugal’s biggest bank on Thursday raised fears that the country might run into financial trouble again — just weeks after emerging from a bailout — and trigger a flare-up in the market crisis Europe thought it had quelled.

Join the Discussion
Post a Comment

Stocks and bonds fell worldwide while the price of gold rallied as traders sought it out as a safe investment.

The tensions center on Espirito Santo International, a holding company that is the largest shareholder in a group of Espirito Santo family companies, including the parent of Portugal’s largest bank, Banco Espirito Santo. Espirito Santo International reportedly missed a debt payment this week and was cited for accounting irregularities — the sort of shenanigans that helped cause Europe’s debt crisis four years ago.

Portugal is one of the smaller eurozone economies and, like Greece and Ireland, needed an international rescue in 2011 during the continent’s debt crisis. A three-year economic recovery program was supposed to straighten out its finances. Difficulties at Banco Espirito Santo have triggered fears there may still be some unexploded bombs.

The International Monetary Fund, which provided funds for the Portuguese bailout, acknowledged in a statement that "pockets of vulnerability remain" in Portugal but declined to comment specifically on the case.

Share trading in Banco Espirito Santo was suspended after a precipitous fall of more than 17 percent, dragging the Lisbon stock exchange down by 4.2 percent and pushing up the yield on Portugal’s benchmark 10-year bonds by 0.21 percentage points to 3.97 percent. The Dow Jones Industrial average slid 0.5 percent while Germany’s DAX fell 1.5 percent. Italy and Spain saw sharper 2 percent drops.

Part of what is spooking investors is that the size of the problem remains unclear and there is potential for the trouble to spread to other companies.

An audit in May found "serious" accounting irregularities at Espirito Santo International, which this week reportedly delayed a short-term debt payment to clients. Because Espirito Santo International has important stakes in a network of the group’s companies, its financial trouble could weigh on the others.

One of the subsidiaries, Espirito Santo Financial Group S.A., is the major shareholder in Banco Espirito Santo and was downgraded Wednesday by Moody’s by three notches. The ratings agency expressed concern about "the lack of transparency" and the extent of links between the group’s companies.


story continues below
story continues below

The Portuguese government insists Banco Espirito Santo is solid and the drop in its stock prices merely reflects trouble at the parent company.

But investors have heard such reassurances in Europe before, only for banks to go bust and require the sort of huge rescue loans that can bankrupt small countries like Portugal.



Copyright 2014 The Salt Lake Tribune. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Top Reader Comments Read All Comments Post a Comment
Click here to read all comments   Click here to post a comment


About Reader Comments


Reader comments on sltrib.com are the opinions of the writer, not The Salt Lake Tribune. We will delete comments containing obscenities, personal attacks and inappropriate or offensive remarks. Flagrant or repeat violators will be banned. If you see an objectionable comment, please alert us by clicking the arrow on the upper right side of the comment and selecting "Flag comment as inappropriate". If you've recently registered with Disqus or aren't seeing your comments immediately, you may need to verify your email address. To do so, visit disqus.com/account.
See more about comments here.
Staying Connected
Videos
Jobs
Contests and Promotions
  • Search Obituaries
  • Place an Obituary

  • Search Cars
  • Search Homes
  • Search Jobs
  • Search Marketplace
  • Search Legal Notices

  • Other Services
  • Advertise With Us
  • Subscribe to the Newspaper
  • Access your e-Edition
  • Frequently Asked Questions
  • Contact a newsroom staff member
  • Access the Trib Archives
  • Privacy Policy
  • Missing your paper? Need to place your paper on vacation hold? For this and any other subscription related needs, click here or call 801.204.6100.