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LISBON, Portugal (AP) – In a six-room Lisbon office where until last year more than a dozen people worked, engineer Joao Paulo Lopes sits alone in silence amid dark computer screens, patiently waiting for a bankruptcy lawyer to shut the company’s doors and send him home.
Small firms with fewer than 50 workers, like the gas and water installation company where Lopes works, make up more than 99 percent of Portuguese businesses. They are the bedrock of the country’s economy. And they’re collapsing at an alarming rate.
“We’re witnessing a daily deluge of small companies going under,” says Raul Gonzalez, president of the national association of bankruptcy owners. His organization logged more than 10,000 company insolvencies last year — a startling 60 percent jump from the previous year.
Portugal’s economy appears locked in a death spiral. The debt-crippled eurozone country is choking amid grinding austerity measures enacted in return for a €78 billion ($102 billion) bailout package last April, a steep recession, an acute shortage of cash, and record unemployment.
That has put Portugal back into the crosshairs of Europe’s two-year-old debt crisis. The country looks as though it will follow Greece in needing another bailout and debt restructuring. And its ordeal could bring another spasm of financial distress for the 17-nation bloc sharing the euro.
The three major international ratings agencies have downgraded Portugal’s credit worthiness to junk status over the past year. Their decisions reflect a lack of market faith in the country’s short-term prospects. In recent days, interest rates on the country’s bonds — a weather vane of investor sentiment — have climbed to highs not seen since the European single currency was introduced.