The European Central Bank, operating within the legal limits imposed on it by the treaties that govern the European Union, is providing some liquidity to the banks and a bit of relief on the interest-rate front for sovereign borrowers, but it cannot do much to prevent the insolvent from being forced to default.

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Despite a climb in yields on ten-year government bonds to above 7%, the average interest rate Portugal pays on sovereign borrowing is only 3.6%, says Mr Teixeira dos Santos.

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As the Italian economy slows, as many expect it will, the ECB may be forced to expand its balance sheet again with interest rate cuts and possibly some form of sovereign bond purchasing, which we ever more ironically refer to as QE.

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In fact, the interest rate - or yield - on Portuguese sovereign debt has risen relentlessly, especially in the last week, as the deal to cut the value of Greek debt owned by the private sector has moved closer to a reality.

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But because market intermediaries will also be taxed, even a 0.1% tax rate will translate, via a "cascade effect, " into higher interest rates on sovereign bonds.

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Spanish banks like Santander and BBVA hold more than 40% of the outstanding sovereign debt of Portugal (valued at about 60 billion euros), which carries an eye-wateringly high interest rate reflective of the risk that the county will default on some of its payments.

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