Small, disciplined and uncomplaining, Portugal had given the troika the least amount of headaches of all the countries who received a bailout since the crisis began. The European Commission has elected to ignore that, even with the sacrifices that Portugal has made, the country will still struggle to meet its goals because of failing economic fundamentals. Still, Prime Minister Pedro Pasos Coelho recently affirmed that two-thirds of Portugal?s cutbacks have been completed and that in one year will be able to start selling its debt again.
Pasos Coelho is one of the EU?s star students, but he runs the risk of losing investors? confidence ? European stock markets suffered severe losses yesterday and investors flocked to bonds ? and dragging down other countries in the region. The Ibex in neighboring Spain fell sharply yesterday morning, but rose slightly later in the day thanks to a good opening on Wall Street. The Portuguese have realized that the ?terrible two years? that Pasos Coelho promised at the beginning of his term ended up worse than expected.
Companies and jobs keep disappearing, the national debt is 127% of GDP and flagging spending cutbacks have created a crisis in the nation?s government that global markets thanks could cause Portugal to need another bailout or other form of aid, ultimately souring its relationship with the troika. What is happening in Greece and Portugal calls into question the efficacy of the bailouts that they received.
This is the origen of the split in the heart of the Portuguese government. A solution is needed to help the country meet its financial obligations and give some hope to its citizens. If not, then a new debt crisis could hit Portugal and spread to Spain and the rest of the euro zone.
