A Bailout for Portugal? Gov’t Braces for Collapse Amidst Debt Crisis
- Posted on March 22, 2011 at 6:52pm by
Meredith Jessup
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LISBON, Portugal (AP/The Blaze) — Portugal’s government is on the verge of collapse after opposition parties withdrew their support for another round of austerity policies aimed at averting a financial bailout.
The expected defeat of the minority government‘s latest spending plans in a parliamentary vote Wednesday will likely force its resignation and could stall national and European efforts to deal with the continent’s protracted debt crisis.
The vote comes on the eve of a two-day European Union summit where policymakers are hoping to take new steps to restore investor faith in the fiscal soundness of the 17-nation eurozone, including Portugal.
Last year, both Greece and Ireland had to accept multibillion dollar rescue packages after markets lost faith in their governments’ efforts to deal with their debt burdens.
By most measures, Portugal is one of the eurozone’s smallest and feeblest economies but its financial collapse would likely trigger a fresh bout of nerves over other debt-heavy — and bigger — euro countries such as Spain, Belgium and Italy.
“Portugal seems very likely to become the third … eurozone country to need a bailout,” Emilie Gay, European economist at Capital Economics said.
The governing Socialist Party’s parliamentary leader Francisco Assis made an 11th-hour appeal for opposition rivals to negotiate changes to the latest austerity package and ensure the government’s survival. Prime Minister Jose Socrates, who heads the government, has said he will no longer be able to run the country if the package is rejected.
“This is a decisive moment,” Assis said Tuesday.
Finance Minister Fernando Teixeira dos Santos has said failure to enact the package — the fourth set of measures in 11 months — would push Portugal closer to needing financial assistance.
But opposition parties say the center-left government’s latest austerity plan goes too far because it hurts the weaker sections of society, especially pensioners who will pay more tax. The package also introduces further hikes in personal income and corporate tax, broadens previous welfare cuts and raises public transport fares.
The leader of the main opposition center-right Social Democratic Party, Pedro Passos Coelho, said late Monday that the political deadlock made an early election “inevitable.”
Markets have heaped pressure on Portugal over the past year as investors demanded ever higher returns for lending it money, driving the country’s borrowing costs to intolerable levels.
The yield on its 10-year bond, for example, was at 7.4 percent Tuesday — not far from euro-era records. The interest rate has been above 7 percent for several weeks despite the government’s earlier austerity measures which, its political rivals say, failed to quell investor fears.
Even so, the government has insisted it can weather the current difficulties and doesn’t need a bailout.
The government’s austerity measures have won praise from other European countries, but they are only half the story: Portugal urgently needs to generate fresh growth.
The economy is in deep trouble, with a double-dip recession expected this year and unemployment standing at a record 11.2 percent. Moody‘s recently downgraded the country’s credit rating, and Standard & Poor’s has warned it may follow suit.
On Tuesday, CNBC discussed the bailout for Portugal and the future economic challenges facing Europe:
As in Greece, Portugal’s austerity policies have prompted numerous strikes, with train engineers set to walk off the job during the morning commute Wednesday.
Portugal’s plight stems from a decade of miserly growth. While growing at the tepid rate of 1 percent a year, it ran up debt to finance its western European lifestyle.
Its economy is hobbled by old-fashioned practices, especially outdated labor laws which protect jobs, and has failed to keep pace with more flexible competitors.
Tullia Bucco, an analyst at Unicredit in Milan, says investors who have risked their money on Portugal can take some heart from the fact that the Social Democratic Party espouses debt reduction and increased economic competitiveness. The Social Democrats have been ahead in recent opinion polls.
Even so, the winner of any election is unlikely to get an extended honeymoon period.
“They could be very tough times ahead,” Bucco said.
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Comments (47)
cstcomputers
Posted on March 23, 2011 at 12:23amStop, cut Unions, Cut Gov. Spending and we have a chance still. Do nothing but give them what they want and we’re doomed. Michael Moore says there is plenty of money out there. His and Andy’s maybe…
Report Post »Eblaze44
Posted on March 22, 2011 at 11:04pmRelevant?: http://www.iamthewitness.com/DarylBradfordSmith_Rothschild.htm
Report Post »Colonel-Burkhalter
Posted on March 22, 2011 at 10:52pmIsn’t Eurpoe great? Pay up, pay up, and no whining please.
Report Post »Doctor Nordo
Posted on March 22, 2011 at 9:46pmSo lefties, how is that whole socialism thing going in Portugal?
Ohh….
Report Post »commonsenseguy
Posted on March 22, 2011 at 9:20pmhoe about we send the unions over a long with all the free loaders over here,and the union bosses { thugs } can support them all ,remember that it is not about any thing but the money,so pack their bags and send the off.
Report Post »mrsmileyface
Posted on March 22, 2011 at 9:09pmIm with you Salamander. Lets pack our bags and buy up some shorline.
Report Post »Salamander
Posted on March 22, 2011 at 9:03pmOh, wow! Maybe we can just empty the National Treasury and send it all to Portugal!!! Whooppeeee, just print some more! I wonder if ANYBODY in government ever had an allowance or had to work for it? A paper route? A menial job, so they can see how ‘the other half’ lives??? Maybe Portugal NEEDS to go bankrupt! Then, we could go over there and buy some of their beautiful oceanfront properties at USA foreclosure prices!
Report Post »CaptainSpaulding
Posted on March 22, 2011 at 8:59pmAnother nation collapses thanks to EU involvement. :)
Report Post »dschanz
Posted on March 22, 2011 at 8:33pmThis is very like a thousand other nations that have gone bankrupt over the centuries. There is nothing new under the sun. Those of us who believe in Biblical law and morality must teach our children to reject the views of economics that have gotten us here. The rebuilding of society will have to be on that basis if it is to work – low or no debt, honest money (do not put dross in the silver or water in the wine (Isaiah), save for future needs, honest weights and measures (Proverbs) and a host of other concepts we have abandoned. It is time to rebuild based on truth.
Report Post »missiontorestoreamerica.com/blog
82dAirborne
Posted on March 22, 2011 at 9:02pmI got through Army Basic Infantry Training just fine. Two days later I started Jump School. One week after that I broke two bones in my left foot. Decision time!!: Be “recycled” (start all over again) or go on to a regular Infantry assignment. I wanted those wings badly! I started over again. You haven’t lived until you’ve gone thru Hell Week twice. I got it done. Hurt like hell for months. Nobody was ever more proud of a set of basic jump wings than I was twenty odd years ago. Crap – thirty now.
This story isn’t about me. Or the U.S.Army. Or being a Paratrooper. I did not give up when I easily could have. I am very glad I didn’t.
We can’t give up on our great nation. We just can’t.
“All the Way and Then Some, Sir!!!”
Report Post »Verum Ad Potentia
Posted on March 22, 2011 at 8:28pmBehold our future if we don’t change our ways…SOON!!!
Report Post »martyw
Posted on March 22, 2011 at 8:15pmfailure builds character……. let em fail and get up and dust themselves off … and denounce socialism
Report Post »martyw
Posted on March 22, 2011 at 8:09pmlet em fall thats what the socialist run countries….deserve…. LEARN FROM FAILURE…..
Report Post »NSDQ
Posted on March 22, 2011 at 8:15pmABSOLUTELY!! You beat me to it, There is no reason for them to change their ways and better themselves if they dont feel the consequences of their mistakes.
Report Post »quicker
Posted on March 22, 2011 at 8:08pmAnd these liberial idiot want to be more like europe
Report Post »vtech61
Posted on March 22, 2011 at 7:58pm82dAirborne
Posted on March 22, 2011 at 7:33pm
Time, past time, to let failing business’/ countries fail. The bailouts cannot go on forever and we have to start somewhere sometime; now is the time Portugal is the place.
=====================
Ditto to the above.
Report Post »Let the chip fall.
psalms
Posted on March 22, 2011 at 7:52pmGood thing nobody saw this coming.
Report Post »ConsiderThis
Posted on March 22, 2011 at 7:47pmThis sure sucks for Obama and the Progressives. Just as they’re getting ready to drop in Socialism the darn thing is failing everywhere.
Report Post »miles from nowhere
Posted on March 22, 2011 at 7:43pmI believe this is another country that went with the GREEN philosophy and died by it. Green does not make a profit, it is a blackhole that countries do not survive.
Report Post »jim
Posted on March 22, 2011 at 7:38pmAnother successful Socialist Democracy… this is what Obama has in store for us.
Report Post »miles from nowhere
Posted on March 22, 2011 at 7:38pmThe Unions will be the first ones in line to get there handout, they are more important then anybody else. You know , the entitlement mentallity. Wait and watch for the Union thugs to protest. Another example of liberals running a country in the grond and then begging for more money that will go to waste.
Report Post »82dAirborne
Posted on March 22, 2011 at 7:33pmTime, past time, to let failing business’/ countries fail. The bailouts cannot go on forever and we have to start somewhere sometime; now is the time Portugal is the place.
Report Post »clockwatcher
Posted on March 22, 2011 at 7:31pmDo they have a black jimmy carter running their nation too?
Report Post »Darmok and Jalad at Tanagra
Posted on March 22, 2011 at 7:54pmWould that be Jimmy Walker Carter?
Report Post »Tnredneck
Posted on March 22, 2011 at 7:26pmHey where is broker 101??? Didn’t glen beck predict this several months ago??
Report Post »Showtime
Posted on March 22, 2011 at 9:44pmI don’t know. Last night I was wondering where he was.
WTP showed up, “just as I predicted,” however! :-)
Report Post »TexasCommonSense
Posted on March 23, 2011 at 9:33amI remember Glenn using the acronym PIGS, Portugal, Ireland, Greece and Spain, to describe future economic trouble. That seemed like so ling ago. It was long before Greece was in the news.
Report Post »dcwu
Posted on March 22, 2011 at 7:22pmThe way to fix these things is just not paying the creditors.
Report Post »The creditors don’t lend any more and the government has to work with what it takes in.
Problem solved.
martinspotatorolls
Posted on March 22, 2011 at 7:21pmbreak out the checkbook here we go again
Report Post »Robert-CA
Posted on March 22, 2011 at 7:15pmWhat a surprise send then Andy Stern :)
Report Post »Darmok and Jalad at Tanagra
Posted on March 22, 2011 at 7:34pmWhat did the portegese do to you, that would be cruel and unusual punishment, let them eat cake instead, then send Michelle.
Report Post »Oil_Robb
Posted on March 22, 2011 at 7:47pmGermans are ready to drop the Euro…its about time to let those Socialist make the hard decisions and cut the Unions.
Report Post »CatB
Posted on March 22, 2011 at 8:08pmTough .. so are we!
Report Post »Cemoto78
Posted on March 22, 2011 at 9:46pmAnd there it is. Another socialist experiment that didn’t work AGAIN. Can’t these progressives see this, or are the blinders on so dark they just can’t seem to see past it. And America, wake up, there has not been a socialist Marxist style government that has lasted or worked. As the old saying goes, “sooner or later you will run out of other peoples money.”
Report Post »RepubliCorp
Posted on March 22, 2011 at 9:52pmEuropean Union………like all unions, Failed
Report Post »Non-sequitur
Posted on March 22, 2011 at 10:00pm“European Union………like all unions, Failed”
Yep. European Union, Trade Unions, Soviet Union, United States of America… all terrible failures.
Report Post »Snowleopard {gallery of cat folks}
Posted on March 22, 2011 at 10:48pmSo one more european country is again on the edge? Once she goes, how much longer until the US will go; or shall we be the next one and plunge the world into financial ruin?
Report Post »Gold Coin & Economic News
Posted on March 22, 2011 at 11:08pmHold onto your hats, and gold, folks because we’re next.
Report Post »mauijonny
Posted on March 23, 2011 at 3:52amIck, “NON”, that’s just creepy. Where did you grow up? Let me rephrase that; where do you live:? I‘m guessing a ghetto where you were born a po’ black child (Steve Martin said it first). Prolly had to deliver newspapers to get through skoo ’cause there were no gov’t programs available to hep ya ’cause us po’ folk…well…you know…
Let me tell you something, NON, I know it isn’t PC of me, but I grew up po’ and white, with a multicultural/racial family. As a matter of fact, I was one of two evil white folk in the whole tribe. We ate things, on a not-so-regular basis, like SPAM and Vienna Sausage. I wore knee-socks until they were ankle-ankle socks. Regardless, my favorite things to do was to watch – watch the peeps, watch the stars (in the sky), watch the waves. In the interim, I worked my ass off, and started a few of my own businesses. None of them made me monetarily rich, yet ALL of them made me rich in a way that I don’t think folks like you will EVER understand. Life is an adventure, my friend, and there is nowhere on Earth that you can truly seek that besides the United States of America. Now, you might ask yourself WHY…
Report Post »GODSAMERICA
Posted on March 23, 2011 at 4:52amOf course they’re going to reject it. Just like a lot more countries will do the same thing. It’s like here in the US and the welfare leeches over here saying give me free money, give me free money.
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