Poll: Investors see default for Greece, Portugal, Ireland

LONDON — International investors view a sovereign default by a euro-area nation as more likely than not, with more than four-fifths betting Greece eventually will fail to pay off its debt.

Eighty-five percent of those surveyed this week said Greece probably will default, with majorities predicting the same fate for Portugal and Ireland, a Bloomberg Global Poll shows. The outlook for all three countries deteriorated since January.

"All these countries will go bust at some stage," said Wilhelm Schroeder, a poll participant who helps manage the equivalent of about $172 million for Schroeder Equities in Munich. "I just can't see a scenario in which these countries get out of their debt problems."

The pessimism underscores how investors remain unconvinced that European policy makers can prevent the euro-area's first default even as they look to beef up Greece's $156 billion rescue package. The cost of insuring against a Greek default reached a record this week as investors increased bets the country won't be able to make good on its borrowing.

The number of survey respondents anticipating a default in Greece rose 11 percentage points since January and 12 points from last June, according to the poll of 1,263 investors, analysts and traders who are Bloomberg subscribers.

Worries over Europe pushed the dollar up nearly 1 percent on Friday and erased the week's gains in the stock market.

The Dow Jones industrial average lost 100.17 points, or 0.8 percent, to close at 12,595.75. The S&P 500 fell 10.88, or 0.8 percent, to 1,337.77. The Nasdaq lost 34.57, or 1.2 percent, to 2,828.47. The slide turned the Dow and S&P lower for the week.

Greece, Ireland and Portugal were forced to seek aid as their swelling budget deficits, prompted investors to shun their bonds, causing a surge in borrowing costs that made it prohibitive to tap financial markets. After a year of austerity, Greece ended 2010 with a budget deficit equal to 10.5 percent of gross domestic product. That was the region's second largest after Ireland at 32 percent. Portugal was fourth at 9.1 percent, three times the EU's 3 percent limit.

In the quarterly survey, 59 percent regarded Portugal as likely to renege on its debt, up from just under half at the start of the year and about a third in June 2010. Fifty-five percent said Ireland will probably default, an increase from 53 percent in January and 17 percent last June.

"Ireland, Portugal and Greece will probably all need to restructure," said James Shugg, a senior economist at Westpac Banking in London who responded to the poll. "They are continually going to need more and more bailout funds, and at some point the decision will be made to draw the line and get creditors to participate."

Investors expressed more confidence in Spain with just one in four saying the euro-area's fourth-largest economy is likely to default. Six percent anticipate a default in the United States and 5 percent in Britain.

European finance ministers are scheduled to meet in Brussels Monday and Tuesday and will discuss Greece. Dominique Strauss-Kahn, managing director of the International Monetary Fund, which is also financing the EU bailouts, will attend.

Material from The Associated Press is used in this report.