Austerity Choking The Life Out Of Portugal
The European debt crisis is far from over, as austerity measures is little by little choking the life out of European countries under the stipulations of bailout terms. With continually contracting economies, and out of control unemployment, the question over the solidarity of the Union is far from being resolved.
Finance Minister Gaspar Resigned Due To Austerity In Portugal
Due to the overall displeasure of the Portugese people regarding the austerity measures imposed by the IMF, ECB and the EU; finance minister Vitor Gaspar has turned in his resignation. His comment regarding the situation was: “Repeated slippages have undermined my credibility as finance minister.” Treasury Secretary Maria Luis Albuquerque has been appointed to replace Gaspar at this juncture.
Portugal’s Economy Suffering Because Of Austerity Measures
Although the purpose of Austerity Measures is to get the overall debt load under control, it often has the reverse effects as the vice like grip on spending, creates a situation where jobs are cut, spending is reduced and the economy contracts even further. Portugal has already spent two years in a deep recession and the economy is expected to contract by another 2.3% this year. In spite of the implementation of Austerity measures, public debt hit 10.6% of economic output this year and tax receipts fell. To make matters worse, unemployment is projected to hit 18.2% this year and 42% of youth workers are unemployed.
EU Urges Portugal To Continue With Austerity Measures
In spite of discouraging economic data, the EU, ECB and IMF are urging Portugal to stay the course with their austerity measures. They also feel that in spite of the fact that Gaspar was unable to hit targets, he did point the country in the right direction on spending habits.
Austerity almost appears to be a lose-lose situation for countries caught in the cross fire. It becomes a revolving door where spending reduction, creates more economic problems, which creates more spending in return. It’s only a matter of time before one of the EU countries being squeezed by IMF imposed austerity makes the decision to back out of the EU. When this happens, the entire solidarity of the union is at risk and the financial turmoil it will create is difficult to fathom. For more information on how the situation in the EU will impact your investments, speak to a Redhawk Financial advisor near you today.