Concerns about the health of a parent company of Banco Espirito Santo - Portugal’s largest listed bank - has hurt peripheral euro zone bonds. As Joanna Partridge reports it also curbed demand at Greece's second debt sale following its 2012 default.
Could contagion be making a comeback in the euro zone? Fresh concerns about the health of a parent company of Portugal's largest bank hurt peripheral euro zone bonds. Espirito Santo Financial Group, the largest shareholder in Banco Espirito Santo said it had decided to suspend shares and bonds at its parent company. Worries about the situation hit bond yields from Portugal to Italy. And it also curbed demand at Greece's second debt sale since its default in 2012. It came as inspectors from the troika of Greek creditors were given an unpleasant welcome. Unemployed workers tried to disrupt their meeting. It's the first visit since May's European elections, where the government had a poor showing due to unpopular austerity. They're checking on the country's reforms as part of its bailout programme and met with the new finance minister. Managing Director of the European Stability Mechanism, Klaus Regling, says Greece is on the right road. SOUNDBITE: MANAGING DIRECTOR OF THE EUROPEAN STABILITY MECHANISM (ESM), KLAUS REGLING SAYING (English): "Investors are regaining confidence, we see that clearly. Exports are starting to pick up and growth is slowly returning. If Greece continues in this direction then the country will return to a good economic performance, a good future, with economic competitiveness and growth and jobs." Jobs are still sorely needed. The unemployment rate remains near record highs of 27%, more than double the euro zone average. Protests also continue - workers at the main state power company the latest. They're angry at parliament's decision to privatise part of the Public Power Corporation. But selling-off state assets is in the terms of Greece's bailout programme. Brenda Kelly from IG says Greece still has to tackle its debt. SOUNDBITE: Brenda Kelly, Market analyst, IG, saying (English): ""Grecovery" has replaced the word "Grexit", certainly, but I do feel that debt sustainability is something that we can't ignore and this something that has not yet been addressed, yes we've seen bailouts, yes we've seen extensions on bailouts, bilateral loans, but we still have to question when and how Greece can actually afford to pay back these loans when there's an absolute lack of growth." Greece's six-year depression has shrunk its economy by a quarter. But it finally expects to return to growth this year.