LONDON — Europe’s government debt crisis intensified yesterday as worries grew that the continent’s most financially troubled countries, mainly Ireland and Portugal, will need a bailout to avoid bankruptcy, just as Greece did earlier this year.
Ireland was the epicenter of the latest shock wave through Europe’s financial system, with fears growing that its bank bailout — the world’s costliest when measured per capita — will overwhelm the country’s finances and force the government to seek a financial rescue from its European Union partners, with whom Ireland shares the euro currency.
The price investors demand to hold the debt of Ireland hit new euro-era highs yesterday, with the yield on a 10-year bond almost reaching 9 percent. The benchmark German rate, by comparison, was almost 7 percentage points lower.
Those high yields are both signs of market fear and a big problem for the Irish government. They indicate that it will be much more expensive for the government to borrow the next time it needs to.
Analysts warn the high rates have effectively shut Ireland out of the credit markets. Traders increasingly believe the government will soon be forced to tap an emergency fund for eurozone nations that are facing bankruptcy.
“The threat of implosion looks similar to the conditions which prevailed in Greece a few months ago,’’ said David Buik, an analyst at BGC Partners.
Greece was saved from imminent default on its loans in May, when it received a $150 billion rescue loan from the other 15 eurozone nations and the International Monetary Fund.
At the time, eurozone governments sought to save the common currency by creating a $1.02 trillion backstop for any other countries that might need to tap it.
That time seems to be approaching faster than European lawmakers would have liked.
President Jose Manuel Barroso of the European Commission said yesterday at a briefing on the sidelines of the G-20 economic summit in Seoul that “in case of need, the EU is ready to support Ireland.’’ He noted there are “necessary instruments’’ in place for that support.
