Nobel prizewinning economist Paul Krugman has penned a somewhat pessimistic article on the European economy and the situation that Portugal finds itself in.
"Things are terrible here in Portugal, but not as terrible as they were a couple of years ago. The same thing can be said about the European economy as a whole. And that is, I think, good news."
Krugman was writing from Lisbon for The New York Times. In "The Diabetic Economy," the economist is pessimistic about an European economic recovery and used the situation in Portugal to focus on "The bad news" which Krugman says "is that eight years later in a supposed temporary financial crisis, the economic weakness continues with no end in sight. And this is something that should concern not only everyone in Europe."
Krugman does list some positive aspects in relation to the eurozone, which has finally managed to get unemployment down just over 10%, but says the United States economy has grown 10% compared to pre-levels crisis and unemployment is now below 5%.
Krugman refers to low interest rates as the insulin that diabetics have to inject: “These injections are not part of a normal lifestyle, and have many side effects, but they are necessary to alleviate the symptoms of chronic illness. In Europe the chronic disease is the persistent weakness in spending," "cheap money helps to fight this weakness, although it does not provide a cure."
Krugman warns about Europe's inability to cope with a new crisis, whether in its midst - in Greece or due to a Brexit from the UK - or because of a recession in China.
"It is hard to see what Europe should be doing to cure its chronic illness," he writes, referring to the need to increase public spending, especially in Germany and France, which would allow the growth of economies, even in peripheral ones such as Spain or Portugal. "But doing the right thing seems to be politically out of the question," he sighs.
Krugman does not lack humour, "let's put it this way: visiting Europe can make an American feel good about his own country."
The economists leader comes alongside conformation that Portugal’s public debt rose €1.7 billion in March from February, and now stands at the impressive figure of €233 billion, according to the Bank of Portugal’s figures.
"This change reflects positive net issuance of securities (€1.4 billion), an increase of liabilities in currency and deposits (€0.5 billion) and a decrease in loans (€0.3 billion)' according to the interminable accompanying notes from the Bank of Portugal.
However this headline figure is analysed, Portugal’s overall debt continues to rise despite the country being subjected to austerity measures and tax increases that have done nothing to stimulate the economy or enthuse businessmen to invest.
The current level of Portugal's debt is unrepayable yet politicians continue about their daily lives, ignoring the proverbial 'elephant in the room.'
Comments
I think that António Costa has to win this argument. He has to inject confidence into Portugal´s economy, and to lift it from its present slough of despond. An unlikely outcome for a socialist.