As we discussed on Wednesday, Europe — and now at least one ratings agency — is doing its very best to trigger a terminal bank run in Greece and thereby deal the final, destabilizing blow to the country’s radical socialist saviors (Syriza) who, in the event the ATMs go dark or depositors end up Cyprus’d, would be forced to either concede to each and every Troika demand in order to get a deal (thus abandoning campaign promises and its entire mandate in the process) or risk social and political instability and the prospect that Greeks will eventually decide that a government of pandering technocrats beats starving any day of the week. 

In this context we asked if perhaps it was time for Greeks to ask themselves if this is the kind of "European" partner they want to bind their fate to: a partner that will do everything in its power to subvert a democratically elected government, even if, or rather especially if, it means a wholesale "bail-in" for Greek depositors, who may lose as much as 70 cents on every euro.

We went on to say that after Greece is done soul searching, the people of Spain, Italy, Portugal and Ireland should ask the same question, because if we have a Grexit in two weeks, then these countries are next.

Well don’t look now, but Portugal’s Socialist Party (which leads in the polls ahead of an expected October election) is pledging to implement a "reverse policy" as it relates to austerity and relations with the Troika.

The Telegraph has more:

Europe faces the risk of a second revolt by Left-wing forces in the South after Portugal’s Socialist Party vowed to defy austerity demands from the country’s creditors and block any further sackings of public officials.

"We will carry out a reverse policy,” said Antonio Costa, the Socialist leader.

Mr Costa said a clear majority of his party wants to halt the “obsession with austerity”. Speaking to journalists in Lisbon as his country prepares for elections - expected in October - he insisted that Portugal must start rebuilding key parts of the public sector following the drastic cuts under the previous EU-IMF Troika regime…

"There must be an alternative that allows us to turn the page on austerity, revive the economy, create jobs, and – while complying with euro area rules – restore hope to this county," he said.

While the Socialist Party insists that it is a different animal from the radical Syriza movement in Greece, there is a striking similarity in some of the pre-electoral language and proposals. Syriza also pledged to stick to EMU rules, while at the same time campaigning for policies that were bound to provoke a head-on collision with creditors…

Mr Costa unveiled a package of 55 measures in March, led by a wave of spending on healthcare and education that amounts to a fiscal reflation package. The party would also roll back labour reforms and make it harder for companies to sack workers…

The plan would appear entirely incompatible with the EU’s Fiscal Compact, which requires Portugal to run massive primary surpluses to cut its public debt from 130pc to 60pc of GDP over 20 years under pain of sanctions.

The increasingly fierce attacks on austerity in Lisbon are likely to heighten fears in Berlin that fiscal and reform discipline will break down altogether in southern Europe if Greece’s rebels win concessions. Worry about political "moral hazard" is vastly complicating the search for a solution in Greece.

"Greece is the testing ground and everybody is watching very carefully. That is why the Spanish and Portuguese prime ministers have been so hawkish," said Vincenzo Scarpetta, from Open Europe.

In other words, the reason why concessions (any concessions) to the Greeks are a non-starter in Athens' negotiations with creditors is that the IMF, the European Commission, and most especially Germany, want to send a clear message to any other 'leftist radicals' who may be thinking about using the "one move and the idea of EMU indissolubility gets it" routine as a way to negotiate for breathing room on austerity pledges, will get exactly nowhere and will have a very unpleasant time on the way.

Of course the situation is a bit different in Portugal, as the country is not beholden to "the institutions" to the same extent as Greece. That said, once someone gives you a $78 billion loan, it's likely to be a long time before they give up their right to have a say in your affairs especially when the balance isn't completely paid off. More from The Telegraph:

Portugal is no longer under Troika control. It exited its €78bn bailout programme last year and returned to the markets. It is currently able to borrow money for 10 years at an interest rate of 2.35pc. "We no longer have any direct leverage," said one EU official...

That largely depends on the definition of "direct leverage"... 

However, countries remain under "post-programme surveillance", with two monitoring missions on the ground each year until they have repaid 75pc of the money. Portugal will not be in the clear for a long time.

The legal text stated that the council of EMU ministers can issue "recommendations for corrective actions if necessary and where appropriate". The EU bail-out funds (ESM and EFSF) have their own “early warning mechanism” to ensure that debtors stay on the right track.

Yes, "recommendations for corrective actions," and let's not forget the fact that one of the reasons Portugal's borrowing costs are low enough to where it makes sense for the country to essentially refi its IMF debt (which carries an interest rate of 3.5%) by tapping the bond market at what, until recently, were sub-200bps yields on the 10-year, is the ECB's implicit promise to "do whatever it takes" to support EMU member nations. Further, should the country suddenly slide back into the fiscal abyss (which, if you look at the numbers is not at all out of the question) and need another "program", EU officials will want to ensure the country's government won't be able to point to the Greek negotiations for examples of Troika leniency. 

We'll close with the following graphics which demonstrate the precarious situation the country still faces even as its politicians look to rock the austerity boat: