Portugal in Limbo as Finance Minister Evokes the Ghost of Greece

Portugal’s outgoing government has a word of advice for the next prime minister: If you stray from Europe’s budget rules, it will only tempt the Greek Fates.

   After a loose alliance ofleft-wing parties on Tuesday ousted Prime Minister Pedro Passos Coelho in a parliamentary vote, thenation of 11 million people awaits President Anibal Cavaco Silva to pick his successor. The Socialists, who say they will comply with European Union rules, are itching to take over and reverse some measures that were enforced in exchange for financial aid.

   “Sadly, you only need to look at the recent history of one of our partners in the euro, Greece, and the cost of the alleged end of austerity and the revolt against Europe’s rules to see the effect it has,” Finance Minister Maria Luis Albuquerque said on Tuesday before the vote. “What have they gained? More recession, more poverty, more unemployment and an increase of the dependency on European institutions and the IMF.”

   Coelho’s political fortunes have swung from praise for nursing the economy back to health, to humiliation for serving out one of the shortest terms on record. With elections in neighboring Spain coming up, what happens in Portugal serves as a measure of how voters in Europe are feeling after years of belt-tightening.

   Portugal followed Greece and Ireland in requesting a three-year bailout from the European Union and the International Monetary Fund. It cut spending and raised taxes. But unlike Greece, which has gone through multiple aid programs, the Iberian country exited its bailout in 2014 and returned to growth.

   Portuguese 10-year bond yields were at 2.74 percent on Tuesday after rising to as much as 2.91 percent on Monday, the highest since July. After peaking at 18 percent three years ago at the height of Europe’s debt crisis, the yield fell to as low as 1.5 percent in March and 2.3 percent just before the Oct. 4 election.

   “Fiscal relaxation resulting in a less favorable trajectory in government debt-to-GDP levels could lead to a negative rating action,” Fitch Ratings said in a statement on Wednesday. The political uncertainty comes just as Portugal is taming its mountain of debt.

Πηγή: bloomberg.com