Portugal insisted this morning that it was under no pressure from its European Union partners to accept a multimillion euro bailout that could prevent the crisis in the eurozone spreading to its neighbour Spain.
After Financial Times Deutschland reported eurozone nations and the European Central Bank were urging Portugal to follow Ireland and capitulate to financial aid, the office of the Portuguese prime minister José Sócrates said it was "totally false" that the country was under such pressure.
Spain, whose borrowing costs have shot to alarming levels above 5%, also distanced itself from speculation that it wanted Portugal to agree a deal.
"What Spain wants is for Portugal to pass its budget and fulfil its stability programme," a source told Reuters.
Spanish prime minister José Luis Rodríguez Zapatero said this morning that investors were wrong to bet against Spain. "Those who are taking short positions against Spain are going to be mistaken," he said on RAC1 radio. He ruled out "absolutely" that Spain will need a bailout.
Amid signs that the attempts to agree a bailout for Ireland of between 85bn (£71.7bn) and 90bn is failing to restore confidence in the eurozone, the single European currency extended its losses in early trading. The euro fell to fresh two-month lows against the dollar of $1.3257.
Stock markets across Europe also tumbled, with the FTSE 100 in London dropping 46 points to 5652, a loss of 0.8%. Germany's Dax was down 0.6% and France's CAC fell 0.9%. Ireland's Iseq lost 0.4% and Spain's Ibex 1.2%, and Italy's benchmark index was down 1% in early trading.
European bond yields rose again this morning, with the yield or rate of return on 10-year bonds hitting 5.17% in Spain, 7.1% in Portugal, 8.99% in Ireland and 11.94% in Greece.
The anxious start to trading today followed what Gary Jenkins, head of fixed income research at stockbrokers Evolution, described as "another very worrying day for the EU".
He said that the "endgame" may be approaching if Spain's borrowing costs remain high.
"Whereas the financial woes of the likes of Ireland, Portugal and Greece are, to say the least, problematic they are manageable for the EU as a whole due to the size of their economies. However, if we continue to see the recent trend in Spanish bond yields continue then the crisis is going to be taken to a completely new level as Spain accounts for approximately 11.7% of eurozone GDP, which is pretty much double the figure of the aforementioned countries," Jenkins said.
"Thus it may well be that we are approaching the endgame of this part of the crisis as Spain is of such importance that one can only imagine that the EU will regard it as the line in the sand that cannot be crossed," he added.
hmmm, Seriously, where have I heard this before?