Wednesday, April 13, 2011

Retweet: Portugal's unnecessary bailout

Every once in a while this site goes off the rails and covers topics not directly tied to New Media -- that is the freedom one has when one is the publisher, editor, reporter and janitor. One reason for this, of course, is that newspeople remain news people forever.
One topic discussed here recently was the financial crisis in Portugal. I have included headlines in the Short Takes section (at top right of the home page), and recently TNM reader and media designer Pedro Monteiro wrote a nice piece providing background on the situation there. (Side note: I love getting contributions from TNM readers. As of the last traffic report, TNM had readers in March from over 90 different countries.)

Today the NYT has posted a column by Robert M. Fishman, professor of sociology at the University of Notre Dame, and co-editor of “The Year of the Euro: The Cultural, Social and Political Import of Europe’s Common Currency.” Entitled Portugal's Unnecessary Bailout, Fishman argues that it is the bond traders that are the cause of Portugal's current difficulties.

I think the piece is well worth reading in full, but here is a snippet:

Market contagion and rating downgrades, starting when the magnitude of Greece’s difficulties surfaced in early 2010, have become a self-fulfilling prophecy: by raising Portugal’s borrowing costs to unsustainable levels, the rating agencies forced it to seek a bailout. The bailout has empowered those “rescuing” Portugal to push for unpopular austerity policies affecting recipients of student loans, retirement pensions, poverty relief and public salaries of all kinds.

The crisis is not of Portugal’s doing. Its accumulated debt is well below the level of nations like Italy that have not been subject to such devastating assessments. Its budget deficit is lower than that of several other European countries and has been falling quickly as a result of government efforts.