Tag Archives: austerity

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PORTUGAL’S ELDER STATESMAN HAS CALLED ON HIS NATION TO DEFAULT

Mario Soares, who led Portugal to democracy in the 1970s after the Salazar dictatorship, has called on the government to default on its debts. The economic pressure on Portugal has been mounting in recent weeks, and the nation is losing patience with the EU imposed austerity. The Portuguese are looking at the death spiral in Greece, caused by their various rounds of bailouts and austerity.

Soares told Portuguese television channel Antena 1, “Portugal will never be able to pay its debts, however much it impoverishes itself. If you can’t pay, the only solution is not to pay. When Argentina was in crisis it didn’t pay. Did anything happen? No, nothing happened”.

Last week Portugal’s top court ruled that the government’s decision to slash pension payments and public sector wages was illegal. The ruling means the government is struggling to find the budget cuts required from elsewhere.

Portugal received an EU/IMF bailout in 2011, and as the crisis deepens again, many think it highly likely they will need another bailout very soon. If Portugal were to default, it would almost certainty mean their expulsion from the eurozone, and may lead other nations to follow their example.

Read More: The Telegraph

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Could France Need a Bail-Out?

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The former UK Prime Minister Gordon Brown has spoken ahead of next week’s G20 summit in Mexico, about the prospect of a required bailout for Italy and France. Gordon Brown has called for the G20 to begin to draw up a “concerted global action plan” to deal with the crisis.

This comes after German Chancellor Angela Merkel, attacked the French President Francois Hollande for allowing the French economy to stall. She also echoed Mr Brown’s comments, warning that Hollande’s socialist policies could lead to France being enveloped by the debt crisis.

Last year, when officials began to speak of the contagion spreading to Italy and Spain, no solid measures were put in place, and now we are on the brink of Spain requiring a full bail-out (the bailout currently under consideration is only to bailout their struggling banking system). Spain and Italy were both labelled at the time as “too big to fail”.  At that time the thought of a French bailout was unthinkable.

However, it is expected that the summit in Los Cabos, Mexico, will see world leaders continuing to pressure Chancellor Angela Merkel to agree to Eurobonds. Mrs Merkel has left Germany for the summit, remaining steadfast in her tough austerity stance – in the face of French opposition from Francois Hollande, and with President Obama also backing the new French President.

 

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Could the Euro Break Up?

Markets continue to tumble across the globe, as the Euro crisis deepens. Since the election in Greece, no new coalition government has been formed, so no agreement reached on the austerity cuts to satisfy agreements with euro partners. The German Chancellor has now told Greece, if they do not stick to their bailout agreements, they will be expelled from the Euro.

In Greece 70% voted for parties against the EU-IMF imposed austerity, but 69% of Greeks want to remain in the Euro. A leaked report has shown that Germany are drawing up plans for a Greek exit from the Euro.

But this has significant dangers:

  •  If Greece goes – will Italy, Spain, Portugal and Ireland want to follow?
  • What happens to the greek debt? It’s in Euro’s not drachma, ….Greece’s creditors would loose billions.
  • The European banking system is already on it’s knees, Greece’s exit could see major banks across Europe collapse.
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Camp David: G8 Leaders Hope Greece Will Remain in the Eurozone

The G8 leaders met at Camp David before the Nato Summit in Chicago. The G8 is made up of the leaders of: America, Canada, Britain, France, Russia, Germany, Italy and Japan.
The financial crisis was at the centre of talks.

This was the first time newly elected French President Francois Hollande and President Obama have met. The two men are said to have agreed on the need to concentrate on growth, seen as Obama’s approval of Hollande’s policy, of moving away from austerity, towards stimulating the economy with more borrowed money.

Obama’s endorsement of Hollande has left Germany’s Angela Merkel more isolated in Europe