Tuesday, March 29, 2011

A look at the current economic crisis in Portugal

Pedro Monteiro, a native of Portugal, and a digital media designer at a major media firm, has been kind enough to volunteer his insight into the developing financial crisis in his country. Here is his guest column:

Portugal has been in a crisis since the loss of the Brazilian colony. One of the leading Portuguese journalist, José Manuel Fernandes, has written a very good article about our historical lack of proficiency with money, which is a very good tool to understand our problems today.

With José's help, let's start by setting a brief historical background on the country's finances.

When Portugal lost the Brazilian colony, the country also lost a stable treasury. Since then, the country was never able to stabilize its economic and financial situation. By the end of the XIXth century, with the English embargo, Portugal went bankrupt. This incident was one of the main factors that led to the fall of the monarchy and, in the end, to the rise of a dictatorship.

President Aníbal Cavaco Silva

Only in 1974 were we able to rid ourselves of the dictatorship and be free again. Sadly, our financial situation was no better than before. In 1977, Portugal asked for it's first IMF intervention. This was not enough, and the institution returned again in 1983.

After joining the EU in 1986, Portugal finally had a chance to receive some money that could help us modernize the country. This was a small golden era for Portugal. Our current President, Aníbal Cavaco Silva, was Prime Minister at that time. Now-a-days, most Portuguese believe that the money we brought in was not well spent.

Fast forward for the present and we again face a difficult financial situation. Being one of the weakest economies within the Euro zone, we are face an onslaught from the international markets. It has been increasingly difficult to find money to borrow on the international markets. In order to tackle this problem, our now dismissed government, Partido Socialista (PS), had to make several budget adjustments. As it was a minority government, last week in parliament the government saw it's fourth adjustment in the year overruled by all of the opposition parties. The Prime-Minister, José Sócrates, resigned on that same day.

Right now, Portugal is waiting for a new election, the date to be set by the President, expected to be in the early Summer. The opposition biggest party, Partido Social Democrata (PSD), is expiated to win those elections.

What remains to be seen is whether they can keep making adjustments that will ease the international financial market pressure. Another big doubt is whether international help will be asked for and which party, PSD or PS, will take the blame for it.

Meanwhile, the country is being swept by lots of public manifestations. People are arguing against the harsh measures they have to face: right now and in the near future.
Pedro Monteiro

1 Comment:

PDalton said...

Thank for the recap. Most US media outlets don't say much other about what is going on in Europe unless a rating service lowers their rating on debt.