Anyone still in need of proof that austerity isn’t fixing the euro area’s debt crisis should visit Portugal.
Hundreds of thousands of Portuguese took to the streets of Lisbon to protest against economic austerity on March 2, and the only surprise is that they didn’t do so earlier. Portugal is the euro area’s clearest example of how austerity is killing the patient, with the ill effects of counterproductive fiscal retrenchment unfolding before our eyes.
We rarely hear about Portugal’s economic troubles. With a population of 11 million, the country is much smaller than Spain or Italy, and it has less public debt than Greece and less private debt than Ireland.… Seguir leyendo »
Italy’s parliamentary election could not have gone worse for the country or the euro area.
It is now possible that in the coming months the currency zone’s third-largest economy will need a bailout from international creditors, at a time when Italy will have no government in place to ask for, or negotiate, a rescue. In case you had any doubts, the euro-area crisis is back.
As has so often been the case in Italy, the political gridlock has come in the Senate. Neither Pier Luigi Bersani’s center-left coalition, nor the center-right led by Silvio Berlusconi managed to win a majority, in a political system where a government needs the support of both houses in order to get anything done.… Seguir leyendo »
Greece reported recently that it has reached a primary budget surplus, the Holy Grail of austerity, meaning that once you exclude interest payments on the country’s massive debts, the country is finally taking in more revenue than it spends.
This news should be worthy of a ticker-tape parade, after three years of Draconian retrenchment and a partial write-down of privately held Greek debt.
Cruelly, however, the main beneficiary of a return to primary surplus may not be Prime Minister Antonis Samaras and his pro-bailout government, but the main opposition Syriza party, which is pushing for the country to refuse further austerity measures and declare a moratorium on its debt payments.… Seguir leyendo »
It is a rule of thumb among eurozone crisis observers that the more something is denied by officials, the more likely it is to happen. With Spain’s borrowing costs at euro-area record highs, its officials insist it will not need a full bailout programme. To most of us, however, it seems no longer a question of if, but when a bailout will come. Market panic this week seems to suggest it is imminent, but I think it will be put off as long as possible, probably until early next year.
Long-term borrowing costs may have broken an eye-watering 7.5%, but the fact that short-term borrowing costs have rocketed as well is more worrisome.… Seguir leyendo »