Wednesday, March 24, 2010
Euro and Markets Feel Downgrade of Portugal Debt
The Euro hit an 11 month low today and Wall Street shares declined as Portugal's debt was downgraded and the long term outlook is negative. This is causing a lot of pressure for a solution to the Euros problems. As of last Tuesday the Euro hit the lowest it has been since May 2009. Their deficit is at 9.3% of GDP which is much larger than the predicted 6.5%. If Portugal plans to meet the EU's standard of a 3% of GDP as a deficit then they need to take "sizable consolidation measures and withdraw fiscal stimulus this year" in order to reduce the deficit by 2013. Portugal has come up with an austerity package that will reduce government spending, raise the taxes of the wealthy, and putting a cap on wages in the private sector. Also, Germany might agree to help with an aid package to Greece but as a last resort.
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2 comments:
This is current situation with Greece and Portugal, as well as others, is a good example of why trade liberalization is ineffective, especially for underdeveloped countries.
I am interested to see the political as well as economic implications of such high debt in eurozone countries. I know that in 2004 the European Union had their largest enlargement ever of, I believe, 10 countries. I also know there are many countries that are fulfilling the necessary requirements currently. I wonder if the European Union will be stricter in allowing countries to join for fear of financial burdens. Even more so, will the eurozone be stricter with the Maastricht criteria completion for fear of countries affect on the euro.
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