Book contents
- Sovereign Debt Crises
- Sovereign Debt Crises
- Copyright page
- Dedication
- Contents
- Contributors
- 1 Introduction
- 2 Managing Public Debt Crisis in Argentina
- 3 Why Developing Countries Should Not Incur Foreign Debt
- 4 Ecuador’s 2008–2009 Debt Restructuring
- 5 Greece: An EU-Inflicted Catastrophe*
- 6 Grenada: A Small Island Developing State Needs New Ways Out of Its Debt
- 7 Iceland: A Human Rights-Sensitive Approach to Deal with Financial Crises
- 8 Indonesia’s 1997–1998 Economic Crisis
- 9 The Irish Sovereign Debt Crisis Post-2009
- 10 Short-Term Capital Controls and Malaysia’s Fast Recovery after the East-Asian Crisis
- 11 Sovereign Debt
- 12 Portugal’s Austerity Bailout
- 13 Don’t Waste a Serious Crisis*
- 14 Lessons from South Korea
- 15 The Spanish Crisis
- 16 Conclusions
- Index
12 - Portugal’s Austerity Bailout
Lessons of a Dangerous Experiment
Published online by Cambridge University Press: 16 November 2017
- Sovereign Debt Crises
- Sovereign Debt Crises
- Copyright page
- Dedication
- Contents
- Contributors
- 1 Introduction
- 2 Managing Public Debt Crisis in Argentina
- 3 Why Developing Countries Should Not Incur Foreign Debt
- 4 Ecuador’s 2008–2009 Debt Restructuring
- 5 Greece: An EU-Inflicted Catastrophe*
- 6 Grenada: A Small Island Developing State Needs New Ways Out of Its Debt
- 7 Iceland: A Human Rights-Sensitive Approach to Deal with Financial Crises
- 8 Indonesia’s 1997–1998 Economic Crisis
- 9 The Irish Sovereign Debt Crisis Post-2009
- 10 Short-Term Capital Controls and Malaysia’s Fast Recovery after the East-Asian Crisis
- 11 Sovereign Debt
- 12 Portugal’s Austerity Bailout
- 13 Don’t Waste a Serious Crisis*
- 14 Lessons from South Korea
- 15 The Spanish Crisis
- 16 Conclusions
- Index
Summary
In May 2011, a liquidity crisis affecting both the banks and the Treasury triggered the intervention of the Troika in Portugal. Three years later, in May 2014, the Portuguese authorities performed what was then called a clean exit from the ‘adjustment’ programme. Meanwhile, the Portuguese sovereign debt, which amounted to 98 per cent of GDP in 2011, escalated to 132 per cent in 2014. Immediately after the supposedly clean exit of the program a new banking crisis surfaced. For the public, the fact that an adjustment programme that was justified by a large public debt and financial fragility has produced an even larger debt and a new banking crisis stands out as paradoxical. The public’s perplexity is justified. The Portuguese people have learned from experience that fiscal consolidation and internal devaluation in the context of a general economic downturn are unable to deliver a sustainable trajectory of the public debt or a recovery of the banking sector. It has further learned that the short-term recessive effects of fiscal consolidation and internal devaluation may be lasting and may hinder recovery. The active and overall population decreased, long-term unemployment and low investment depleted human capabilities and the capital stock. With the bailout experiment Portugal became a poorer country that must serve a much larger debt. In spite of a positive reorientation of government policies away from austerity, in the present framework of the euro, and absent debt restructuring, the prospects for recovery are bleak.
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- Sovereign Debt CrisesWhat Have We Learned?, pp. 201 - 219Publisher: Cambridge University PressPrint publication year: 2017