For all Mr Sócrates's dynamism, the glare surrounding the Greek crisis has exposed the weaknesses that persist in Portugal's economy and - in common with Ireland, Spain and Italy - caused the spread on its bond yields to climb rapidly in comparison with their German equivalents.

When Moody's placed Portugal's Aa2 long-term sovereign debt rating on negative outlook in October (it cut Greece to A2 last month), Mr Thomas said the country faced the threat of a "slow but inexorable decline". Last week's budget measures have failed to change the outlook.

The centre-left government has imposed a public sector wage freeze as part of a plan to cut the budget deficit from a record 9.3 per cent of GDP in 2009 to 8.3 per cent this year, vowing to bring it below 3 per cent by 2013. Ratings analysts say this will require cuts over four years and could be undermined by slow economic growth, which is forecast at 0.7 per cent this year after a contraction of 2.7 per cent in 2009.

"Growth seems set for a weak and fragile recovery in 2010 and the outlook is little brighter for the longer term," said the International Monetary Fund in a December report.

Sluggish growth and low productivity are Portugal's greatest vulnerabilities. A decade of growing below the European Union average has badly damaged the competitiveness of a small economy that can no longer rely on currency devaluations to boost exports

Eoin Treacy's view Greek government bonds found some respite on Friday with yields pulling back somewhat and falling further today; closing near 6.64%. This accelerating trend may have topped out and an upward dynamic would be required to reassert the short-term move. The deterioration of Greek sovereign debt has led to investors asking who is next?

Attention has focused on Portuguese debt and CDS spreads have expanded rapidly over the last two weeks, but at 150 basis points they are still below both Ireland and Greece's. The spread of Irish, Spanish, Portuguese and Italian debt over the European Generic has increased over the last couple of weeks. However, even with this deterioration they are not in the same category of risk as Greece.

This action suggests that investors are paying much closer attention to the fiscal tightening measures of various European countries. Failure to follow through on commitments to narrow deficits is likely to be met not only with censure from the ECB, but by a concerted shorting of the relevant sovereign debt by international speculators. In this environment, confidence is a precious resource that needs to be fostered.