Taking a look at Eurozone economy and crisis, the most common question posed these days was “Is Portugal the new Greece?” having in mind that it might easily become the victim of the joint action, solidarity and “brotherhood” of Europe and the IMF. The subject took place after the current news about this country. To be more precise, there is a sign, that the EU should not help Greece, adding that Spain and Portugal risked being swept away through this situation and the latest news is not encouraging.
Greece went into trouble because, according to official misinformation, it had not played the game as Portugal did, using the same half truths that presented in their reports of achieved results. It obeyed in all respects to the commands of Europe and the IMF. Therefore, during the May of 2011 Portugal received 78 billion euros support. At the same time, the public debt was 107% of GDP. In 2012, it was announced that according to forecasts, it could rise to 118%. This is the one verification of the harmfulness of policies obligatory by the so-called international community. Indeed, this deprivation is anticipated for much of what the economy is reduced.
The Portuguese Finance Minister Vitor Gaspar is respected by his colleagues for tough measures he has reduced the budget deficit of more than a third. The result is that the economy constricted 1.5% in 2011, with a trend towards 3% in 2012. External analysts determined that the actions that guide to blocking will not reimburse the debt even in the long term. In early February this year, a switch over between Vitor Gaspar, Finance Minister, and his German corresponding person has disclosed. They categorically predicted that the additional effort would be necessary. Now it is officially confirmed that Brussels is considering a second salvage.
Yet on July 5, 2011 the forecasts of Moody’s rating agency downgraded the rating of Portugal with four mark notes on the sovereign debt. This rating means that Portugal, as being a country in the euro area that is striked by the debt crisis, is considered appropriate to assemble its commitments, but the investment is measured as “speculative” and consequently risky. It was shown already at the time that Portugal would need a setting of financial support before being able to finance itself in international markets. Moody’s notes assessed its negative outlook, meaning that it plans to further subordinate the medium term.
To give good reason for this reduction, the rating agency claimed that it was afraid that Portugal fails to meet the commitments it made to the European Union and the International Monetary Fund, in decrease of its deficit and debt stabilization. In substitute for the loan of 78 billion euros agreed in May, Portugal was dedicated to put into practice a program requiring thorough reforms over three years. This new austerity plan was supposed to enable the country to bring its public deficit to 9.1% of GDP in 2010 to 5.9% this year and 3% in 2013.
However, Moody’s fell within the growing threat to see Portugal have need a second aid plan before again have a loan on the markets. The rating agency believed that Portugal might not be capable to borrow on financial markets at rates tolerable before the second half of 2013 or later. It appears that the agency was correct in its predictions that confirm the latest news. To be more precise with this, although it is not stated openly, this meant that the Portuguese power was not sufficient to force its citizens to start caring about the country’s economic conditions.
The whole situation and processes during this period could be easily described in two words: acknowledgment and impatience. The dissimilarity today with Greece is that the Portugal is not uprising again and its streets were not inflamed. The question is just how long it might last. For a short period of time people seem to accept the severity measures imposed by force. There is foreseen a turn down of old age pensions, a drop in wages and higher taxes and, as elsewhere, the political class does not support the common sacrifices. So, if first there was Greece and after it was Portugal, the question that should be posed is which country will be the next, because, surely, the situation shows that this will not end here.
The answer to this question might be Spain, since it had a public debt of 36% of GDP before the debt crisis, the coefficient should increase to 84% by 2013. Also, Italy stood at 105% in 2009 and will go to 126% in 2013. The rich Italians, in the meantime, are known by real estate agents in London for their ability to purchase real luxury. Despite the misinformation, specialists agree that the necessities of the IMF by their ruthless austerity put off real growth to reconcile. The fact is that the “international community” is becoming more and more intolerant towards the overspending and curing the malpractice of PIGS countries. Over the time it more and more resembles to the game of Angry Birds where these problematic elements are trying to ruin its stability, pointlessly at the first sight. They just keep on hitting and ruining.
The IMF, under the direction of Dominique Strauss-Khan, has built an interference method that has been ordinary and sometimes with devastating effects in many countries that have called on it. The fact is that Christine Lagarde blindly followed negligence of DSK. The damage, both for the countries supposedly aided and Europe, is the assignation. In the case of Greece, the money is dispensed into a bottomless hole. Somehow, for Portugal and possibly for Italy and Spain the money is poured without providing any realistic resolution.
For the lending countries, is the devastation by taxes or borrowing essential. In a first round, these countries are members of the EU and in the second round they are all members of the IMF which makes the problem of so called PIGS countries became global. The remarkable breakdown of development in Europe will find some of these explanations. Regarding the further EU enlargement, the new potential members would experience too much trouble. The European Union would try to prevent joining of any economically problematic, over-indebted or overspending country rather than it would insist on the application of their policies in the other categories during the international process.
Though it might seems as a chance for Western Balkan countries that have many open question regarding the rule of law, the fact is that establishing sustainable economic growth in the time of crises looks even more like a mission impossible. However, this situation might seem inspiring for countries such as Montenegro, since it gives a chance to think of all the alternative ways of creating the wealth, which will primarily start from the point of establishing the rule of law to allow the economy to function properly.