In June 2012, the government said the economy would grow more slowly and its debt rise higher into 2013, although the finance minister said that Portugal would stick to the terms of the tough bailout agreement whatever comes.
The ratio of Portugal’s debt to its overall economy, or gross domestic product, was 107 percent when it received the bailout. But the ratio has grown since then, and by 2013 is expected to reach 118.6 percent.
That’s not necessarily because Portugal’s overall debt is growing, but because its economy is shrinking.
The most optimistic projections point to a 3 percent contraction of the economy in 2012, after a 1.5 percent decline in 2011. Officially, unemployment is at 14.9 percent, and more than 30 percent of the country’s young people are out of work. But some analysts suggest that the government is underestimating the true jobless rate, especially for youths, which they say may run as high as 40 or 45 percent.
Hospitals are closing. State benefits, public wages and pensions are being cut. New taxes have been added, and old taxes increased. The government has sold its stake in the national electric company to a state-run Chinese corporation.
The ratio of Portugal’s debt to its overall economy, or gross domestic product, was 107 percent when it received the bailout. But the ratio has grown since then, and by 2013 is expected to reach 118.6 percent.
That’s not necessarily because Portugal’s overall debt is growing, but because its economy is shrinking.
The most optimistic projections point to a 3 percent contraction of the economy in 2012, after a 1.5 percent decline in 2011. Officially, unemployment is at 14.9 percent, and more than 30 percent of the country’s young people are out of work. But some analysts suggest that the government is underestimating the true jobless rate, especially for youths, which they say may run as high as 40 or 45 percent.
Hospitals are closing. State benefits, public wages and pensions are being cut. New taxes have been added, and old taxes increased. The government has sold its stake in the national electric company to a state-run Chinese corporation.
With All the Bad News, the Portuguese Go On
While the austerity measures have unleashed rage and chaos in other European countries, that has not been the case in Portugal. Month after month, the government has obligingly put in place the budget cuts, tax increases and loosened labor laws demanded by its international creditors —the so-called troika of the European Commission, the European Central Bank
and the I.M.F. — with little protest from the Portuguese.
While some opposition leaders and trade unions have called to slow the pace of budget cuts, few suggest that the changes are not ultimately necessary.
Nor do they contest the urgency of efforts to improve the economy’s competitiveness.
That forbearance seems likely to be tested in the coming years. Although the country’s budget deficit is shrinking, public debt as a percentage of gross domestic product continues to rise as the economy contracts. With bond yields in the double digits, there is even talk of a second bailout.
There is little immediate prospect of growth, economists say, particularly with educational levels far lower here than anywhere in the European Union or in much of the developed world. In 2009, only 30 percent of Portuguese adults had completed high school or its equivalent, according to figures from the Organization for Economic Cooperation and Development.
Without growth, reducing debt levels becomes nearly impossible. It is akin to trying to pay down a large credit card balance after taking a pay cut. You can slash expenses, but with lower earnings it is hard to set aside money to pay off debt.
Vitor Gaspar, the Portuguese finance minister, is highly regarded by European economic and finance officials. He has reduced the government’s budget deficit by more than one-third so far, through tough measures that include cuts in spending and wages, pension rollbacks and tax increases.
But many economists say those moves are also a reason Portugal’s economy shrank by 1.5 percent in 2011 and is expected to contract by 3 percent in 2012.
Of the bailout funds sought by Portugal in 2011, €12 billion was earmarked to repair banks tattered balance sheets.
Three banks — Millennium, Banco BPI and Caixa Geral de Depósitos — will draw a combined €6.7 billion to help them meet new capital requirements.
The Finance Ministry said those banks would be “among the best capitalized in Europe” after the transactions were completed.
While the austerity measures have unleashed rage and chaos in other European countries, that has not been the case in Portugal. Month after month, the government has obligingly put in place the budget cuts, tax increases and loosened labor laws demanded by its international creditors —the so-called troika of the European Commission, the European Central Bank
and the I.M.F. — with little protest from the Portuguese.
While some opposition leaders and trade unions have called to slow the pace of budget cuts, few suggest that the changes are not ultimately necessary.
Nor do they contest the urgency of efforts to improve the economy’s competitiveness.
That forbearance seems likely to be tested in the coming years. Although the country’s budget deficit is shrinking, public debt as a percentage of gross domestic product continues to rise as the economy contracts. With bond yields in the double digits, there is even talk of a second bailout.
There is little immediate prospect of growth, economists say, particularly with educational levels far lower here than anywhere in the European Union or in much of the developed world. In 2009, only 30 percent of Portuguese adults had completed high school or its equivalent, according to figures from the Organization for Economic Cooperation and Development.
Without growth, reducing debt levels becomes nearly impossible. It is akin to trying to pay down a large credit card balance after taking a pay cut. You can slash expenses, but with lower earnings it is hard to set aside money to pay off debt.
Vitor Gaspar, the Portuguese finance minister, is highly regarded by European economic and finance officials. He has reduced the government’s budget deficit by more than one-third so far, through tough measures that include cuts in spending and wages, pension rollbacks and tax increases.
But many economists say those moves are also a reason Portugal’s economy shrank by 1.5 percent in 2011 and is expected to contract by 3 percent in 2012.
Of the bailout funds sought by Portugal in 2011, €12 billion was earmarked to repair banks tattered balance sheets.
Three banks — Millennium, Banco BPI and Caixa Geral de Depósitos — will draw a combined €6.7 billion to help them meet new capital requirements.
The Finance Ministry said those banks would be “among the best capitalized in Europe” after the transactions were completed.
With all these bad news Portugal has one of the highest petrol prices in the world, this month alone prices for the consumer have increased by 8 cents per liter.
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