Fancy Footwear and Austerity Won’t Save Portugal

Anyone still in need of proof that austerity isn’t fixing the euro area’s debt crisis should visit Portugal.

Hundreds of thousands of Portuguese took to the streets of Lisbon to protest against economic austerity on March 2, and the only surprise is that they didn’t do so earlier. Portugal is the euro area’s clearest example of how austerity is killing the patient, with the ill effects of counterproductive fiscal retrenchment unfolding before our eyes.

We rarely hear about Portugal’s economic troubles. With a population of 11 million, the country is much smaller than Spain or Italy, and it has less public debt than Greece and less private debt than Ireland. Plus, the government has generally done as it’s told by its international creditors, and the people have — until now at least — quietly accepted their medicine.

Unlike Greece, though, Portugal’s continued decline into recession can’t be attributed to speculation about its potential exit from the euro area. (Ever heard of a Porxit?) Nor can the country’s lack of growth be blamed on a failure to implement the program that creditors set out to return it to sustainable growth. Portugal’s trajectory deeper into recession is unadulterated evidence that the euro area’s insistence on austerity isn’t leading to a recovery.

To read the rest, please see the original piece on Bloomberg View.

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5 Responses to Fancy Footwear and Austerity Won’t Save Portugal

  1. The reason your evaluation is not right is that the problem with Portugal it is not about austerity or the lack of it, but the incapacity of the establishment to take the necessary measures without pression from the outside, name it : Troika, markets or EU.
    Without any type of meritocracy and with nepotism, corporatism and elite endogamy all around, Portugal is paralysed and lacks the mechanisms to move out on his own without a “diktat” from de outside.
    Obviously, the people knows that, furthermore, knows that the only way to get ride of the captivity from the overgrown public sector and his overpaid employees ( the only ones that manifest on the streets) who took the democracy hostage is to accept quietly the troika “diktat”.

  2. Parra says:

    Are you aware that this sector represents 3.64% of total Portuguese exports in 2012?
    So the title (in the matter of footwear) is pretty obvious.
    For the 2nd part, only time will tell.

  3. João Mártires says:

    Hi Megan Greene,
    If you come to Portugal and see for your own eyes probably you will be surprised.
    The problem here is a elder population with 30 years depending on government decisions and a new IT generation that don´t recognize the history of is country. And is leaving the nation towards a new future in EU or a better economic zone. So in the poor classes, the old ones are staying alone with taxes, daily expenses and cuts in their pensions and wages far more than is they can bear. And the elite will be richer than ever before. The lack of a domestic knowledge in simple economics and the low interest rates given by the EURO, conduct them to poverty by paying three times for a house and car they need or even don´t need at all…! Who´s to blame? The people who´s paying, the government and banks who´s collecting and the audit company’s with wrong analysis for the credit quality of all. If they all recognize their part in the problem and shared the responsibility probably the solution and economic growth will be sooner.
    The austerity program is correct to solve the excess of spending but to increase economic development Portugal should should make an inner will to substitute goods came from outside and consume almost only our on production. Other countries with lower working conditions should think better before sending their goods at half price the World labor costs. When the occidental economies turn poorer they will turn poorer also.

    Regards,

  4. Tom Carney says:

    Mm but you fail to mention Portugal is choking under a mountain of red tape. getting anything done with the local municipal is a bureaucratic nightmare. It takes months not weeks to accomplish anything. These factors are the main reason holding back Portuguese enterprise and innovation. The Mediterranean mentality is complexity, not simplicity?

  5. Portugal’s decline, despite taking the medicine, is proof that the Frankenstein currency union is not and will not work for all.

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