-- The intensifying European debt crisis appeared to take a step back from the brink on Wednesday when besieged Portugal was able to sell more than €1.2bn in long-term debt at much lower than expected interest rates.
European officials warned that it was far too early to consider Portugal safe from becoming the third eurozone country pushed into a bail-out because of its inability to fund government operations through borrowing on the open market.
But the German government, among others, signalled that it could help ease fears of a rapid spread of the eurozone debt crisis to Spain and other debt-laden economies on Europe's periphery.
Steffen Kampeter, Germany's deputy finance minister, said he hoped the outcome of the Portuguese debt issue would "put an end to the irrationality in the market".
Angela Merkel, German chancellor, said the auction -- the first long-term bond issue by a peripheral eurozone member this year -- went "quite well". She added: "We will stand by the euro. Germany will do whatever is necessary so the euro remains stable."
French government officials refused to comment, but people close to the government said it was unlikely Portugal would have to seek help from the European financial stability facility, the European Union's bail-out fund, in the next 15 days, but said it remained to be seen whether the upbeat market signals were temporary.
Surviving without a bail-out?The debt issue was also greeted with relief by the European Central Bank, which is thought to have intervened in the Portuguese government bond market before Wednesday's operation.
By containing Lisbon's borrowing costs, the ECB -- which holds its first interest-rate setting meeting of 2011 on Thursday -- has been able to prevent some of the gloomiest market fears about the eurozone from becoming self-fulfilling. But it will be anxious to see eurozone leaders building on the momentum.
The ECB has not put overt pressure on Lisbon to accept a bail-out, but Jean-Claude Trichet, president, has urged eurozone governments to take whatever steps necessary to restore confidence in Europe's 12-year-old monetary union.
But politicians and economists warned that Lisbon might still be forced to turn to the EFSF if bond yields remained at current levels.
Filipe Silva, a Lisbon-based public debt manager with Banco Carregosa, said it was a positive sign that Portugal had succeeded in selling its bonds, but yields were at an "unsustainable" level in the long term.
Fernando Teixeira dos Santos, Portugal's finance minister, said: "The success of today's issue shows Portugal has the necessary conditions to finance itself in the market at prices not only acceptable but favourable in the current climate."
Portugal had guaranteed its 2010 budget deficit will fall "clearly below" its target of 7.3 per cent of gross domestic product, with public spending lower than forecast and tax revenues higher. "The success of this auction has strengthened confidence in our strategy and we will continue to focus on cutting the deficit and improving the competitiveness of the Portuguese economy," Mr Teixeira dos Santos said.
Other Portuguese economists were less optimistic. João Cravinho, a former Socialist minister and an administrator with the European Bank for Reconstruction and Development, said the country was facing "brutal pressure" to ask for a "bail-out".
"We should do everything to avoid this happening. But there's no point in pretending. The situation is extremely serious," he said.