Portugal is fighting a losing battle to contain its public debt and may be forced to impose haircuts of up to 50pc on private creditors, according to a top German institute.


A report for the Kiel Institute for the World Economy said Portugal would have to run a primary budget surplus of over 11pc of GDP a year to prevent debt dynamics spiralling out of control, even in a benign scenario of 2pc annual growth.


"Portugal's debt is unsustainable. That is the only possible conclusion," said David Bencek, the co-author, warning that no country can achieve a primary budget surplus above 5pc for long.


"We won't know what the trigger will be but once there is a decision on Greece people are going to start looking closely and realise that Portugal is the same position as Greece was a year ago."


http://www.telegraph.co.uk/finance/fina ... looms.html