International investors view a sovereign default by a euro-areanation as more likely than not with more than four-fifths bettingGreece will eventually fail to pay off its debt.

Eighty-five percent of those surveyed this week said Greeceprobably will default, with majorities predicting the same fate forPortugal and Ireland, which followed Greece in seeking EuropeanUnion-led bailouts, a new Bloomberg Global Poll shows. The outlookfor all three countries deteriorated since January.

“All these countries will go bust at some stage,” said WilhelmSchroeder, a poll participant who helps manage the equivalent ofabout $172 million for Schroeder Equities GmbH in Munich. “I justcan't see a scenario in which these countries get out of their debtproblems.”

The pessimism underscores how investors remain unconvinced thatEuropean policy makers can prevent the euro-area's first defaulteven as they look to beef up Greece's 110 billion-euro rescuepackage ($156 billion). The cost of insuring against a Greekdefault reached a record this week as investors increased bets thecountry won't be able to make good on its borrowing.

Credit default swaps on Greek debt reached an all-time high1,371 basis points on May 9, the same day the country's two-yearbond yield closed at a record 25.6 percent.

The number of survey respondentsanticipating a default in Greece rose 11 ercentage points sinceJanuary and 12 points from last June, according to the poll of1,263 investors, analysts and traders who are Bloombergsubscribers.

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

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

“Ireland, Portugal and Greece will probably all need torestructure,” said James Shugg, a senior economist at WestpacBanking Corp. in London who responded to the poll. “They arecontinually going to need more and more bailout funds, and at somepoint the decision will be made to draw the line and get creditorsto participate.”

Investors expressed more confidence in Spain with just one infour saying the euro-area's fourth-largest economy is likely todefault. Six percent anticipate a default in the U.S. and 5 percentin the U.K.

Three years of recession, higher borrowing costs and weak taxrevenue are swamping the spending cuts required in return to winthe initial aid. Greece's debt reached 143 percent of GDP lastyear, the most in the euro-region and is set to peak at 159 percentnext year. Standard & Poor's cut its credit rating of Greecetwo levels this week to B from BB- and said further reductions arepossible as the default risk rises.

European finance chiefs are considering more aid for Greece assoaring bond yields jeopardize the country's return to financialmarkets. The original bailout aimed to lower the country'sborrowing costs enough to permit Greece to sell 27 billion euros ofbonds next year. But debt costs remain stifling, with the country's10-year bond yielding 15.5 percent, more than twice the rate thetime of the bailout a year ago.

At an unscheduled meeting in Luxembourg last week, EU officialsdiscussed a “further adjustment program” for Greece. Among theoptions being considered are granting easier repayment terms ordeficit conditions on the original bailout. Some nations aredemanding Greece offer collateral in return for any new loans.

European finance ministers meet in Brussels on May 16-17 andwill discuss Greece. Dominique Strauss-Kahn, managing director ofthe International Monetary Fund, which is also financing the EUbailouts, will attend. Officials rejected talk this week of adefault with European Central Bank Executive Board member LorenzoBini Smaghi describing that option as “political suicide, whichleads many into poverty.”

Aside from Greece, Portugal is awaiting final EU approval forits 78 billion-euro lifeline. Irish officials also are fightingback against speculation they will renege on their 2008 guaranteeof bank debt. That country's deficit ballooned to more than 30percent of GDP last year on the cost of propping up its lenders,forcing Ireland into the arms of its neighbors in November.

Separately, the Bloomberg Global Poll found 55 percent ofrespondents are optimistic about how the policies of ChancellorAngela Merkel affect the investment climate in Germany. U.K. PrimeMinister David Cameron's approach was endorsed by 51 percent and 65percent reported a favorable view of him. Only a quarter approvedof French President Nicolas Sarkozy's strategy.

Forty-four percent of respondents said the ECB's monetary policyis appropriate with a third labeling it too tight and a fifth tooloose. The Frankfurt-based ECB raised its benchmark interest ratelast month for the first time since 2008, lifting it a quarterpoint to 1.25 percent.

ECB President Jean-Claude Trichet was regarded favorably by 57percent of respondents. Bank of Italy Governor Mario Draghi, thefrontrunner to succeed Trichet as ECB president later this year,was endorsed by 34 percent with 21 percent reporting an unfavorableview. Almost half said they lacked the knowledge to gradeDraghi.

The survey of investors, traders and analysts was conducted bySelzer & Co., a Des Moines, Iowa-based firm, on May 9-10 andhas a margin of error of plus or minus 2.8 percentage points.

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