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Now that Greece has been kicked down
the road, it's time for the other PIIGS countries to start lining up for
similar deals. Portugal looks to be next, after its most recent deficit
report:
Portugal's
1Q Budget Deficit Higher Than Expected
LISBON (Dow Jones) - Portugal's
budget deficit for the first quarter of the year came in higher than
suggested by the previous government, forcing the new one to step up efforts
to control the country's accounts.
Portugal's statistics agency said the
deficit for the first quarter was at 8.7% of gross domestic product. Although
it was an improvement from 9.2% of GDP in the fourth quarter, it is still
much higher than the 5.9% Portugal must reach by the end of the year under a
EUR78 billion bailout program.
"This needs to be corrected
fast," a government official familiar with the matter said.
Two government officials told Dow
Jones Newswires Tuesday that the new administration will accelerate some
measures to address the budget gap, including on tax increases. Prime
Minister Pedro Passos Coelho is expected to
announce the measures in parliament Thursday.
Under terms of the bailout agreed
with the European Union, the International Monetary Fund and the European
Central Bank last month, Portugal must cut its budget deficit to 3% of GDP by
2013.
The goal is challenging, particularly
because the country faces a recession over the next two years.
Nonetheless, Passos
Coelho, who took over the post of prime minister
last week, has been quick to show how willing his government is to fulfill
all the requirements imposed by the troika under deadline.
Portugal's bailout success will be key to the euro zone, which is currently struggling to
shake off problems in bailed-out Greece.
Like Portugal, Greece was told to
cuts its budget deficit sharply in exchange for financial aid. So far it
hasn't been able to meet the targets.
Portugal, a country of nearly 11
million, is Western Europe's poorest, with growth that has trailed its
neighbors over the past decade, something economists blame on an uncompetitive
and rigid labor market. The unemployment rate has risen above 12% this year.
Some thoughts:
·
Lately, whenever a new government takes power in a
European country (or a US state for that matter) they discover that their
predecessors have been cooking the books. This shouldn't come as a surprise,
since an incumbent would have to be suicidally
honest to run for reelection on the true numbers.
·
It is a bit ironic though. Didn't the previous
government get tossed out because voters didn't like its austerity plan?
·
"Under terms of the bailout agreed with the
European Union, the International Monetary Fund and the European Central Bank
last month, Portugal must cut its budget deficit to 3% of GDP by 2013." Hmm.
Slicing 6% of GDP out of government spending in two years -- while the ECB is
raising short term interest rates, the global economy is barely growing, and
domestic unemployment is already 12% -- doesn't seem politically possible. So
some sort of extend-and-pretend deal is therefore coming. The question is
whether it happens preemptively or in response to street riots and soaring
yields on Portuguese bonds.
·
The question then becomes whether the current German
government has the political capital left to sell its voters on another big
increase in their collective liabilities. Greece could be explained away as a
one-time problem of a singularly badly-run country. But when several more
failed states line up for the same deal, a pattern will form in the minds of
voters.
·
Meanwhile, the drawn-out euro crisis is giving
reporters time to educate themselves, leading to a
general realization that these bailouts are all about the banks, and that
PIIGS country citizens are being turned into surfs so bankers and their
shareholders can keep living like aristocrats. The next stage in the
education process will be the discovery of parallels between today's global
banks and the French Revolution.
John Rubino
DollarCollapse.com
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