While Greece teeters, one of its eurozone peers on the Iberian Peninsula is feeling a tad wobbly too. The yield on Portugal's 10-year government bond surged above 5 per cent yesterday and the premium investors demand to hold Portuguese government debt over German bunds has leapt 66 basis points from a week ago.

Portugal, like Greece, is a peripheral eurozone economy with poor competitiveness, a high budget deficit, elevated debt and a recently downgraded credit rating. Like Athens, Lisbon must borrow heavily this year – about a fifth of gross domestic product. In spite of Lisbon's plan to cut its deficit to 3 per cent by 2013, it so far shares Athens' failure to convince capital markets that it will make the harsh fiscal adjustments needed. In addition, the European Commission says that Lisbon's assumptions of positive growth this year and next are optimistic. By contrast, Capital Economics forecasts contractions of 0.5 per cent for each year. Moreover, Portugal's recovery could be hampered by its high level of household and corporate debt and by its reliance on Spain, its principal export market, which remains mired in recession.

Portugal is not yet Greece, however. Its 9.4 per cent budget deficit, though more than three times the eurozone limit, is far lower than Greece's 13.6 per cent. Meanwhile, its debt, at 77 per cent of GDP in 2009, is not in the same league as Greece's 110 per cent of economic output. Better still, its debt is deficit-related: Lisbon has not had to provide significant support to Portuguese banks. Above all, in spite of Brussels' reservations, its fiscal figures and actions have far greater credibility than Greece's – and it has successfully cut its deficit before. For now, however, its problems seem equally chronic.