Could be the last gasp for Portugal....
"Portugal’s woes may be warning for Greece" February 15, 2012|By Landon Thomas Jr.
LISBON - As debt-plagued Greece struggles to meet Europe’s strict terms for receiving its next round of bailout money, the lesson of Portugal might bear watching.
Unlike Greece, Portugal is a debtor nation that has done everything that the European Union and the International Monetary Fund have asked it to, in exchange for the $103 billion bailout Lisbon received in May.
And yet, by the broadest measure of a country’s ability to repay its debts, Portugal is going deeper into the hole.
Learned yet?
The ratio of Portugal’s debt to its overall economy, or gross domestic product, was 107 percent when it received the bailout. But the ratio has grown since then and by next year is expected to reach 118 percent.
That’s not necessarily because Portugal’s overall debt is growing, but because its economy is shrinking.
Without growth, reducing debt levels becomes nearly impossible. It is akin to trying to pay down a large credit card balance after taking a pay cut. You can slash expenses, but with lower earnings it is hard to set aside money to pay off debt.
Vitor Gaspar, the Portuguese finance minister who came to power as part of a new government last summer, is highly regarded by European economic and finance officials.
Related: Portuguese Want It In the Pooper
I sensed there was a problem at the time.
He has reduced the government’s budget deficit by more than one-third, through tough measures that include cuts in spending and wages, pension rollbacks, and tax increases....
“Portugal’s debt is just not sustainable,’’ said David Bencek, an analyst at the Kiel Institute for the World Economy, a research organization in Germany. “The real economy does not have the structure to grow in the future and thus will not be able to pay back its debt in the long run.’’
The public in Portugal has generally gone along with the government’s policies without the violent demonstrations that have rocked Greece, but it is starting to lose patience.
On Saturday, more than 100,000 people assembled peacefully in Lisbon’s sprawling Palace Square to rally against the austerity measures and the nation’s 13 percent unemployment, while chanting, “IMF doesn’t call the shots here!’’ The head of Portugal’s largest labor union vowed to hold additional protest rallies.
I'm gasping I'm getting so excited.
The IMF predicts that Portugal will grow enough to reduce its debt to a manageable level. But even the IMF warns in its recent economic review that if growth were to disappoint, Portugal’s debt “would not be sustainable.’’
Gaspar, an economist who is a former research director at the European Central Bank and a disciple of the bank’s austerity-focused philosophy, insists that his country’s debt is manageable.
Have you noticed these guys have been taking over governments all across the continent?
And he has no plans to ease up on austerity. This year he intends to slash government pension payments by close to $1.6 billion, and cut the bonus payouts that public sector workers in this country have long earned....
Gaspar has won plaudits from Europe’s leadership and the IMF, which are eager to champion an exemplar of economic revamping in contrast to Greece’s unspooling disaster.
Portugal ponied up for the banks!
In fact, Portugal is deemed such a model of reform that the Europe Union and IMF are widely expected to come up with more money for Portugal next year if necessary - as was suggested in an overheard exchange between Gaspar and Germany’s finance minister at a meeting last week in Brussels....
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I'm out of breath, readers.
Related: Portugal Under Pressure
