THE RUMOUR MACHINE is in full throttle today over whether Portugal will be the next EU country to accept a bailout.

The Portugese newspaper Publico published an editorial yesterday which Reuters translated as: “Only a miracle will save us from the IMF”. Then a “senior euro zone source” told Reuters that pressure was being applied to Portugal to accept an EU/IMF bailout to prevent infecting the euro with its debt.

Portugal and Spain are going to hold major bond auctions on Wednesday and Thursday this week. Joe Wiesenthal of Business Insider notes that both countries “are seeing 10-year bond yields zoom towards right near all-time highs”.

Germany and France were reported to be forefront in applying the thumbscrews to Portugal but a spokesperson for Angela Merkel said that it would not be the “strategy” of the German government to push Portugal into accepting a bailout. The German paper Welt am Sonntag said differently yesterday: a report claimed that eurozone finance ministers were making calls to Portugal’s finance minister every day – and more than once a day – to appeal for him to accept a bailout. They entitled the report ‘Endspiel um Portugal’ – Endgame for Portugal.

On Saturday, the Portugese prime minister Jose Socrates insisted that Portugal had not agreed to a bailout. He was quoted in the Financial Times as saying:

We have heard reports like this several times over the past year. Portugal is doing everything it needs to do, and that will continue.

The Spanish finance minster Elena Salgado told a national radio station that she was “confident” that “Portugal won’t need any external help”.

Just two hours ago, the EC released a statement saying that there are no discussions underway on an EU/IMF bailout of Portugal – “at this stage”. The European Central Bank appeared to be buying up Greek, Irish and Portugese bonds this morning according to traders.

Meanwhile, a poll of leading economists last week concluded that most thought Portugal will need to go the way of Ireland and Greece and sign up for a bailout.

So, let’s recap on the situation in Portugal:

• Soaring bond yields;
• alleged pressure from Germany;
• Fears of euro ‘contamination’;
• Media reports of a bailout strongly denied by a finance minister and a prime minister.

Now why does that all sound a little too familiar?