SERIOUS MONEY:JAMES BUTLER Hickok, a renowned gunfighter, drew his last breath on the second day of August in 1876. "Wild Bill", as he is better known, entered Deadwood's Nuttal and Mann's saloon that day with a desire to satisfy his unquenchable thirst for gambling.

He sat with his back to the door and Lady Luck deserted him when “Crooked Nose” McCall came through the drinking emporium’s entrance and fired a shot through the back of his head.

Death was almost immediate but, as the dying gambler slipped to the floor, his fellow poker-players seemed more concerned with his five cards. He was revealed to be holding a pair of aces and two eights – the fifth card is a matter of dispute – though Hickok’s last draw will always be known as a “Dead Man’s Hand”.

Ireland appeared to be holding a winning hand in its own high-stakes poker game, although the confidence espoused by members of our investment elite ultimately proved to be nothing more than a bluff.

The cards held by the Government were revealed to be a “Dead Man’s Hand” when Angela Merkel, the German chancellor, stated towards the end of October that any future euro one rescue scheme should include a mechanism for an orderly sovereign-debt default.

Merkel’s sentiments are correct in their entirety, particularly so given that the belief pre-crisis that a euro zone state would not be allowed to default gave bond investors every reason not to distinguish between good and bad sovereign credits.

Timing is everything, however, and her comments gunned down any hopes of an Irish full house. Ireland has followed Greece into intensive care and the question now is how soon it will be before the financial markets call Portugal’s bluff.

Portugal did not enjoy a growth boom following the launch of the euro in 2002, thus the economy suffered neither a precipitous decline in activity nor a destructive collapse of its financial system as the crisis reverberated through the developed world.

Nevertheless, the Portuguese face several daunting challenges that must be overcome if the EU-International Monetary Fund is to be kept from its door.

The Portuguese economy suffered a dramatic loss of competitiveness in the years immediately preceding the launch of the euro. A sharp drop in interest rates triggered a consumption and investment boom that saw household and non-financial sector debt more than double as a percentage of gross domestic product (GDP) between the mid-1990s and 2002.

The private sector boom was accompanied by pro-cyclical fiscal policy and the resulting tightening of the labour market saw wages per capita increase by roughly 6 per cent a year from 1995 to 2002. The loss of competitiveness led to a dramatic loss in export market share and a decline in foreign direct investment inflows.

Large private-sector debt burdens and an increasingly uncompetitive economy saw growth slow to less than 1 per cent in the years following the launch of the euro.

Although the economy did not suffer a dramatic collapse in activity of the magnitude seen in Ireland, it remains to be seen whether a further economic contraction can be avoided in 2011, as the government attempts to reduce the budget deficit from 7.3 per cent of GDP this year to below 5 per cent.

Domestic demand is almost certain to fall next year, as higher taxes and increasing unemployment constrain household consumption, while higher borrowing costs and a poor growth outlook are likely to deter business investment. Thus, the economy is dependent on exports to do the heavy-lifting.

The export outlook, however, is far from encouraging. Portugal’s export structure is weighted towards traditional slow-growing sectors such as paper and wood products.

Comparative advantage in these segments has shifted to the developing world, which has contributed to an alarming fall in the country’s export market share since the mid-1990s.

Furthermore, roughly one-quarter of its exports go to neighbouring Spain, which is hardly a thriving economy.

The Portuguese economy faces enormous structural hurdles, from low productivity to slow growth, but its most pressing need is to convince bond investors that its fiscal austerity programme is on track.

The Portuguese government has been slow to address the problem and its plans are still based on excessively optimistic growth projections.

Time is fast running out and the sternest test of its borrowing capacity will come early next year, when the government needs to raise a large part of its €20 billion annual borrowing requirement.

The financial markets have already spoken. The yield on 10-year bonds has increased by 125 basis points (1.25 percentage points) since the middle of October, while the spread versus German bunds has widened by one percentage point to 4.2 per cent over the same period. The Portuguese, too, could well be holding a Dead Man’s Hand.

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