While the world’s attention is fixed on goings on in the Ivory Coast, Libya, Yemen and Syria, another storm is brewing.

The storm is collecting on the Atlantic seaboard – not stateside, but Europe-side. That storm is Portugal. The Portuguese have long been wracked by debt and instability problems and this was further compounded by the resignation of its government when it could not secure a parliamentary majority to press home a further three-year austerity programme.

Portugal has struggled to bring its finances in line, and it seems that rather than managing to trim its deficit and increase employment, the opposite has happened. Unemployment continues to rise and there are many questions about the country’s deficit to GDP ratio.

In turn, Moody’s has again downgraded Portugal’s bonds. This will increase the interest rate at which Portugal will have to borrow money on the commercial markets to fund its debts. However, given the current state of affairs and increasingly pessimistic view of Portugal’s ability to raise capital, it is quite likely that Portugal’s rating will be cut again.

This has to be taken in terms of Portugal’s credit rating being so flimsy that its bonds could soon be regarded as junk – as happened with Greece. The issue was discussed at a European Union level last month during a summit, and the likelihood is that Spain’s last buffer is about to be stripped away.

In all likelihood, Portugal will need a bailout, or as it is rather diplomatically termed nowadays, require recourse to the eurozone stability fund. The EU always maintained that it could afford to bailout Greece, Ireland, and at a push, even Portugal. But what about Spain? Spain is the fourth largest economy in Europe, but it has a burgeoning deficit and a staggering 20% unemployment rate.

Europe, and its central bank, have always said that Spain will be too large an economy to handle in a single bailout. But since then, the stability mechanism has been fine-tuned and revised in terms of the next EU budget which has yet to be agreed on, but will be drafted once the current one running from the period 2007-2013 runs out.

The writing is on the wall for Portugal, and if this economy does become insolvent and unsustainable, then the focus will move on to Spain. There are others who are not immune. France has so far been sheltered from attention, but its figures are not too good. Italy’s deficit shows no signs of decreasing to sustainable levels and its public debt just continues to grow without check. While world events are of concern and are happening on our doorstep, we would be fools to ignore the brewing storm.