Thursday, March 24, 2011
Portugal turmoil intensifies bailout talk
This article talks about how Portugal's national debt crisis has gotten so out of control that there are rumors that they might ask for an international bailout. With recent worries about the looming national debt Portugal's prime minister has turned in his resignation, because many different political groups within the country are partially blaming him. The country is expected to ask for a bailout sometime soon during the european summit taking place toady and tomorrow. if they do receive a bailout they will become the third country to do so in the past two years.
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4 comments:
I find it somewhat alarming that this is the third country in the EU that needs an international bailout. Although the recession has been tough on most of the world, the economic structures of Greece, Ireland and Portugal seem to be flawed when it comes to overcoming world-wide economic problems. I feel as if the EU needs to evaluate these countries more extensively. International bailouts should be a last resort.
If Portugal does need to ask for a bailout, then this is going to create a huge drop in confidence in the European economies. I think the European Union is going to have to go through a reevaluation of some of their economic policies, as many countries of the world are doing at the moment as there has been a tremendous amount of volatility in growth, unemployment, and inflation globally.
I agree with Aimee and Tim. Seeing as this is the third country in the last 2 years to ask for a bailout, I think the EU should reevaluate all of its countries. A bailout should always be the last resort. The confidence cannot be good currently in these economies. There needs to be a more extensive evaluation process by the EU because this can't continue to happen.
The recent downgrade of Portugal's credit rating from an A+ to an A- certainly spells trouble for a future recovery. It's no wonder they've been downgraded, as they haven't been able to pass a budget plan to address their deficit AND their PM submitted his resignation.
Germany, France, and other stronger EMU countries were careful in deciding whether to bailout Ireland and Greece and they will certainly look even closer at Portugal. Estimates have their bailout needs as high as $100 billion. Also, expectations for future stability need to be established so that these bailouts don't become a trend.
This recession is a global recession so these bailouts are to be expected. But they also highlight greater problems within the Greek, Irish, and Portuguese economies that need to be addressed before any more steps are taken.
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