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

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

“All these countries will go bust at some stage,” said Wilhelm Schroeder, a poll participant who helps manage the equivalent of about $172 million for Schroeder Equities GmbH in Munich. “I just can’t see a scenario in which these countries get out of their debt problems.”

The pessimism underscores how investors remain unconvinced that European policy makers can prevent the euro-area’s first default even as they look to beef up Greece’s 110 billion-euro rescue package ($156 billion). The cost of insuring against a Greek default reached a record this week as investors increased bets the country won’t be able to make good on its borrowing.

Credit default swaps on Greek debt reached an all-time high 1,371 basis points on May 9, the same day the country’s two-year bond yield closed at a record 25.6 percent.

 The number of survey respondents anticipating a default in Greece rose 11 ercentage points since January and 12 points from last June, according to the poll of 1,263 investors, analysts and traders who are Bloomberg subscribers.

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

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

“Ireland, Portugal and Greece will probably all need to restructure,” said James Shugg, a senior economist at Westpac Banking Corp. in London who responded to the poll. “They are continually going to need more and more bailout funds, and at some point the decision will be made to draw the line and get creditors to participate.”

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

Three years of recession, higher borrowing costs and weak tax revenue are swamping the spending cuts required in return to win the initial aid. Greece’s debt reached 143 percent of GDP last year, the most in the euro-region and is set to peak at 159 percent next year. Standard & Poor’s cut its credit rating of Greece two levels this week to B from BB- and said further reductions are possible as the default risk rises.

European finance chiefs are considering more aid for Greece as soaring bond yields jeopardize the country’s return to financial markets. The original bailout aimed to lower the country’s borrowing costs enough to permit Greece to sell 27 billion euros of bonds next year. But debt costs remain stifling, with the country’s 10-year bond yielding 15.5 percent, more than twice the rate the time of the bailout a year ago.

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

European finance ministers meet in Brussels on May 16-17 and will discuss Greece. Dominique Strauss-Kahn, managing director of the International Monetary Fund, which is also financing the EU bailouts, will attend. Officials rejected talk this week of a default with European Central Bank Executive Board member Lorenzo Bini Smaghi describing that option as “political suicide, which leads many into poverty.”

Aside from Greece, Portugal is awaiting final EU approval for its 78 billion-euro lifeline. Irish officials also are fighting back against speculation they will renege on their 2008 guarantee of bank debt. That country’s deficit ballooned to more than 30 percent 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 of respondents are optimistic about how the policies of Chancellor Angela Merkel affect the investment climate in Germany. U.K. Prime Minister David Cameron’s approach was endorsed by 51 percent and 65 percent reported a favorable view of him. Only a quarter approved of French President Nicolas Sarkozy’s strategy.

Forty-four percent of respondents said the ECB’s monetary policy is appropriate with a third labeling it too tight and a fifth too loose. The Frankfurt-based ECB raised its benchmark interest rate last month for the first time since 2008, lifting it a quarter point to 1.25 percent.

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

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

Bloomberg News