Portugal did everything right since it accepted international aid, cutting expenditure and debt. But as growth and employment remain elusive, the danger of a Greek-style default looms large.
In exchange for the €78bn bailout package Lisbon received last May from the European Central Bank (ECB) and the International Monetary Fund (IMF), the government and the main opposition parties agreed to comply with the plan to change the economy. This meant adapting the harshest austerity measures in decades, from making cuts, raising taxes, clawing back on social support and pushing for privatisations.
The problem is that without growth, reducing the national debt is very unlikely. You can slash expenses, but with lower income it’s hard to set money aside to pay off a large debt. An outstanding 14.8% unemployment rate – top of the OECD list after Spain and Greece – only makes this worse. In a nutshell, these are the main reasons why the Portuguese economy hasn’t been able to break free of financial crisis. The Eurozone crisis is only prolonging the suffering. Continue reading
THE VIEW FROM BEYOND 