LONDON — Next target: Portugal.
Speculators have begun to zero in on another small member of the euro zone, highlighting the very same economic flaw that brought Greece to the verge of insolvency: a chronically low savings rate that presses both countries to rely on the now-diminishing appetite of foreign investors to finance persistent deficits.
Just as investors are turning their attention to the next vulnerable country, Greece moved a step closer Thursday to activating a $61 billion rescue package, as Prime Minister George A. Papandreou asked the European Commission and the International Monetary Fund for a meeting in Athens next week.
The rescue package agreed on last weekend — aimed at calming fears of a European country defaulting — has not yet had its desired effect. The yield on Greek 10-year bonds briefly spiked to more than 7.3 percent Thursday, not far from the 7.5 percent level before the rescue package was announced. Interest rates on 10-year government bonds for Portugal have also been jumpy, hitting a high of 4.5 percent Thursday.
A view is taking hold that instead of ushering in a period of lower rates and market calm, the Greek bailout could prompt investors to test Europe's — and in particular, Germany's — stomach for a Portuguese rescue.
That Greece and Portugal are among those in the worst trouble is well known, with both likely to be ensnared in a trap of stubbornly high debt, weak competitiveness and stagnant growth for years. Less remarked upon is that their savings rates — 6 percent of gross domestic product for Greece and 7.5 percent for Portugal — are the lowest by far among developed countries. By comparison, Italy has a savings rate of 17.5 percent, Spain 20 percent and France and Germany 19 percent and 23 percent, respectively.
For Athens and Lisbon, it is a toxic combination: low reserves of capital at a time that the cost of new debt is increasing, while their ability to generate tax revenue needed to pay for these obligations is shrinking because of tough austerity measures.
"Both Portugal and Greece are stuck in the trap of nominal GDP growth being lower than financing costs, and therefore have little prospect of stabilizing the debt-to-GDP ratio," said Tim Lee of pi Economics, a consultancy based in Stamford, Conn.
"The severely negative net national savings rate highlights the fact that the government deficit cannot easily be financed domestically — making it difficult for these countries to emerge from their debt trap."
Lee pointed out that Greece and Portugal are not the only countries so afflicted. The United States and Britain, with savings rates of 10 percent and 12 percent, respectively, join Portugal and Greece as being among the world's worst savers. But unlike the United States and Britain, Greece and Portugal, as members of the euro zone, do not have the luxury of printing money to depreciate their currencies and thus export their way to recovery.
Portugal, perhaps even more than Greece, has suffered in this respect. Portuguese exporters have been losing market share to competitors since entering the common currency in 2000. That has pushed the government to borrow from abroad to finance the current account deficit, thus pushing debt to current levels.