There is a feeling that the economic prospects for Portugal are at last showing some sign of recovery. This month (May 2014) the bailout organised by the international community and the IMF is nearing it’s end. The last review of the bailout was perhaps the first one with a slightly optimistic short term outlook.
The IMF though did stress that there should be no let up on the economic reforms, the growth of debt is still concerning and without these reforms could easily spiral out of control very quickly. Unemployment is probably the most worrying aspect of the recovery, it is obviously the one with the highest social cost. At over 15% it is still among the highest in Europe and like other countries the worse affected sector are the countries young people. However economic activity is improving all the time so it is hoped that this will filter through to the employment figures very shortly.
The reduction of GDP budget deficit is of course the core goal of the IMF bailout targets, Portugal has so far achieved or in some instances beaten it’s agreed levels. Although the official bailout is finished this month, there will be a continuation of some payments whilst the deficit is still being tackled.
Furthermore the country has the option to request a standby loan, mainly to support the substantial shortfall that is still in existence for the 2015 economic year. Access to the financial markets is still limited and until Portugal has full access to the credit markets then it is likely it still will need some financial assistance to stay in the Euro and maintain it’s austerity programme.
The full economic figures and economic indicators can be obtained from a variety of financial data sites. If you want background stories and information on the European economies then check out the financial pages of the BBC website, all data should be available but you may need to use a VPN to access some of the transmitted broadcasts – here’s a guide.
James Goldwing writes on several technology and economic websites and blogs.
This is the month (December 2013) when the Republic of Ireland will reach the end of it’s internationally funded bailout programme. The journey began in November 2010 when it’s biggest banks reached the brink of collapse in spectacular fashion. To rescue them the country was forced to take a 67 billion Euro loan, another huge amount was taken from the the State’s Pension reserve fund.
There was obviously a political cost to pay, the ruling coalition was dumped out of power a few weeks later. The two parties were hit hard – Fianna Fail plummeted and the junior party, the Greens completely wiped out.
Now Ireland is seeking to regain some control and it’s independence again. It will crucially be able to borrow on the International bond markets too. It is hoped the worse of this humiliating episode in Irish history will be at an end.
It is expected that Ireland’s experience will be held up as a role model for those who find themselves in a similar situation. The country has applied and accepted severe austerity measures with relatively little fuss. A political cost has been paid of course, but that was almost inevitable whichever course of action was taken.
The leaders of countries like Portugal, Spain and Greece will be carefully looking at the example of Ireland and seeing if they can replicate it’s recovery. Ireland of course is still saddled with many problems – including huge debts but there is now light at the end of the tunnel. Ireland has many reasons for optimism including many booming companies who have set up there due to it’s low levels of corporation tax. The links with both Europe and close bonds with the UK combined with low tax threshold are of obvious attractions. However there are still some barriers especially in the digital economy.
You may be surprised to hear that a country so closely tied with the UK is unable to access it’s national broadcaster on the internet. This fact the author discovered last week on a visit, fortunately with some internet trickery that was solved through this method I found on Youtube.
So does this mean that austerity can work, is it the answer that debt ridden Europe is looking for? Perhaps it is the problem is that in many cases it also represents political suicide if the measures deliver results over decades rather than years. For instance the IMF loans to Ireland will not be paid off until 2042, and the country will have to endure extensive audits until 75% of the loans have been settled. It’s not a timescale that normal democratic politics fits in well with unfortunately, politicians get elected from providing ‘good stuff’ not paying off loans.
It’s very tough to live in Cyprus at the moment, virtually all sectors are suffering from the austerity measures. You might think it’s fairer that people with money are also being affected by the financial problems, but many of the people with high balances in Cyprus banks are people who have put their lifetime savings there. The deal that is being put towards the stricken Cypriot government is bailout cash in exchange for austerity and a tax on peoples deposits.
Cyprus might not be the biggest country in Europe, and of course the sums are much smaller than Spain, Italy, Greece and Portugal. However what happens in this smal island is important for Europe and the future of the Eurozone. Their latest vote on accepting a new deal was won by only two votes in the Cyprus Parliament. A loss would have probably involved an exit from the Euro and the establishment of the Cyprus pound as a currency again.
No-one denies that this would have been very painful to the economy, even the opposition parties. However the idea of exiting the Euro is becoming more and more realistic for many countries. Just think of the situation on a human level. You go to live in a country with a reputation as a strong financial centre, you place your hard earned life savings in a Cyprus bank. Suddenly it all goes wrong and a huge portion of your savings are eradicated overnight – basically just removed without your consent from the bank. The banking sector in that country is suddenly completely without value – would you put any money in a Cyprus bank?
Confidence is shattered in the banking sector, the financial community and in essence the whole economy overnight. Which business can operate without a bank account? Two votes have saved the Government from Euro exit, but it’s critics say that the effects will be far, far worse. Small members like Cyprus will often suffer because they are forced to trade on the same terms as bigger and more efficient economies like Germany. Different currencies gave countries some flexibility but the Euro means that a Cyprus factory has to compete with one from Hamburg directly.
There are many of us who believe that countries like Cyprus would be better out of at least the Eurozone. Being able to control their own currency would mean at least Cypriots could compete by modifying their exchange rate. If I sound emotional it’s because I spend a lot of my time in Cyprus, and worse I’ve found out about this decision via the BBC website – although I had to fiddle with an Ipad and a UK VPN – http://www.uktv-online.com/bbc-iplayer-on-the-ipad-abroad/ to view it!