News / Europe

Portugal Seeks European Bailout; Could Spain Be Next?

Euro sculpture in front of the European Central Bank (ECB) in Frankfurt, Germany (file photo)
Euro sculpture in front of the European Central Bank (ECB) in Frankfurt, Germany (file photo)
Lauren Frayer

Portugal has become the third European economy, after Greece and Ireland, to request a bailout from the European Commission. Now there are fears that Spain could be next.

It was the moment the Portuguese people - and European investors - had feared. Portugal's prime minister took to the nation's airwaves, explaining the time had come for his country's struggling economy to ask for a financial bailout.

Prime Minister Jose Socrates says he has a responsibility to think about Portugal's national interest, and asking the European Commission for financial help is in that interest. He says "everyone knows" that he regrets it, but the decision was "inevitable."

Portugal's economy has long lagged behind other European nations, with high government debt, burgeoning budget deficits and soaring unemployment. Vanessa Rossi, an economist at London's Chatham House think tank, says Portugal - like Greece and Ireland - simply was not in good enough shape to survive the recent global economic problems.

"The history of Portugal goes back many years, to having a poorly performing economy practically for the past decade, and continual budget deficits that built up to a higher than usual debt level," she said. "This had been a continuous problem they'd tried to address. But particularly when the world economy went into recession in 2009, this has made the struggle so much more difficult."

Europe's longest bridge, in Lisbon, stands as an example of European-funded infrastructure projects that failed to jumpstart Portugal's economy. Now the question is whether a bailout will do the trick, or whether it might go the way of previous European help, failing to truly fix problems at the root of Portugal's economy.

Rossi says Portugal's short-term emergency will be averted, but in the long term, the future is still uncertain.

"There's not going to be any immediate default," she said. "Portugal will have money in order to continue financing itself for the next two or three years. The question is, 'What happens then?' Can you find that new model which will generate a better opportunity to be able to work off this debt in the future. Many people have some doubts about that, given that this is not a new problem, and it seems to have been difficult to tackle in the past."

Another big question is how far the economic crisis will spread. Portugal's neighbor Spain has nearly 20 percent unemployment, after its huge housing bubble burst in recent years. The question was put to Spain's economy minister, Elena Salgado, by a local Madrid radio station.

Salgado says she can "absolutely rule out" the idea of Portuguese contagion spreading to Spain. She says the Spanish economy is "more diversified, more powerful" and "much more competitive than Portugal's."

For now, financial markets seem to believe her. Spain was able to sell 4.1 billion euros of government debt Thursday, and investors accepted lower interest rates than expected.  

Rossi says she thinks Spain will fare better than Portugal.

"To be fair, Spain has made enormous efforts to be able to tackle its problems, in terms of cutting the budget deficit, in terms of looking at the issues of recapitalizing the banks," she said. "It was also true that Spain went into this problem with a far lower level of government debt. Therefore, their ability to cope with this situation is still positive. I think every effort will be made not only by Spain, but also by the rest of the eurozone countries, to make sure that Spain actually continues with its own self-funded solution, and does not turn into a bailout situation such as Portugal."

In recent months, Spain has increased taxes, cut public sector wages raised the retirement age from 65 to 67. Spain's total economy is bigger than those of Portugal, Greece and Ireland put together. That means it could be too big to fail - but also more expensive for Europe to bail out.

You May Like

800-Pound Man Determined to Slim Down

Man says he was kicked out of hospital for ordering pizza; wants to be an actor More

Australia Prepares to Resettle 12,000 Syrian Refugees

Preference will be given to refugees from persecuted minorities, and the first group is expected to arrive before late December More

S. African Miners Seek Class Action Suit Against Gold Mines

The estimated 100,000 say say they contracted the lung diseases silicosis and tuberculosis in the mines More

This forum has been closed.
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Amnesty Accuses Saudi Coalition of ‘War Crimes’ in Yemeni
Henry Ridgwell
October 12, 2015 4:03 PM
The human rights group Amnesty International has accused the Saudi-led coalition of war crimes in airstrikes against Houthi rebels in Yemen. Henry Ridgwell reports the group says hundreds of civilians have been killed in strikes on residential areas.

Video Amnesty Accuses Saudi Coalition of ‘War Crimes’ in Yemen

The human rights group Amnesty International has accused the Saudi-led coalition of war crimes in airstrikes against Houthi rebels in Yemen. Henry Ridgwell reports the group says hundreds of civilians have been killed in strikes on residential areas.

Video No Resolution in Sight to US House Speaker Drama

Uncertainty grips the U.S. Congress, where no consensus replacement has emerged to succeed Republican House Speaker John Boehner after his surprise resignation announcement. Half of Congress is effectively leaderless weeks before America risks defaulting on its national debt and enduring another partial government shutdown.

Video New Art Exhibit Focuses on Hope

Out of struggle and despair often comes hope. That idea is behind a new art exhibit at the American Visionary Art Museum in Baltimore, Maryland. "The Big Hope Show" features 25 artists, some of whom overcame trauma and loss. VOA’s Deborah Block reports.

Video Columbus Day Still Generates Controversy as US Holiday

The second Monday of October is Columbus Day in the United States, honoring explorer Christopher Columbus and his discovery of the Americas. The achievement is a source of pride for many, but for some the holiday is marked by controversy. Adrianna Zhang has more.

Video Anger Simmers as Turks Begin to Bury Blast Victims

The Turkish army carried out new air strikes on Kurdistan Workers Party (PKK) targets on Sunday, a day after the banned group announced a unilateral cease fire. The air raids apparently are in retaliation for the Saturday bombing in Turkey's capital Ankara that killed at least 95 people and wounded more than 200 others. But as Zlatica Hoke reports, there are suspicions that Islamic State is involved.

Video Bombings a Sign of Turkey’s Deep Troubles

Turkey has begun a three-day period of mourning following Saturday’s bomb attacks in the capital, Ankara, that killed nearly 100 people. With contentious parliamentary elections three weeks away, the attacks highlight the challenges Turkey is facing as it struggles with ethnic friction, an ongoing migrant crisis, and growing tensions with Russia. VOA Europe correspondent Luis Ramirez reports.

Video Afghanistan’s Progress Aided by US Academic Center

Recent combat in Afghanistan has shifted world attention back to the central Asian nation’s continuing civil war and economic challenges. But, while there are many vexing problems facing Afghanistan’s government and people, a group of academics in Omaha, Nebraska has kept a strong faith in the nation’s future through programs to improve education. VOA’s Greg Flakus has more from Omaha, Nebraska.

Video House Republicans in Chaos as Speaker Favorite Withdraws

The Republican widely expected to become the next speaker of the House of Representatives shocked his colleagues Thursday by announcing he was withdrawing his candidacy. The decision by Majority Leader Kevin McCarthy means the race to succeed retiring Speaker John Boehner is now wide open. VOA National Correspondent Jim Malone reports.

Video German, US Officials Investigate Volkswagen

German officials have taken steps to restore some of the reputation their car industry has lost after a recent Volkswagen diesel emissions scandal. Authorities have searched Volkswagen headquarters and other locations in an effort to identify the culprits in the creation of software that helps cheat on emission tests. Meanwhile, a group of lawmakers in Washington held a hearing to get to the bottom of the cheating strategy that was first discovered in the United States. Zlatica Hoke reports.

Video Why Are Gun Laws So Hard for Congress to Tackle?

Since taking office, President Barack Obama has spoken out or issued statements about 15 mass shootings. The most recent shooting, in which 10 people were killed at a community college, sparked outrage over the nation's gun laws. But changing those laws isn't as easy as many think. VOA's Carolyn Presutti reports.

Video In 'He Named Me Malala,' Guggenheim Finds Normal in Extraordinary

Davis Guggenheim’s documentary "He Named Me Malala" offers a probing look into the life of 18-year-old Malala Yousafsai, the Pakistani teenager who, in 2012, was shot in the head by the Taliban for standing up for her right to education in her hometown in Pakistan's Swat Valley. Guggenheim shows how, since then, Malala has become a symbol not as a victim of brutal violence, but as an advocate for girls’ education throughout the world. VOA’s Penelope Poulou has more.

Video Paintable Solar Cells May Someday Replace Silicon-Based Panels

Solar panels today are still factory-manufactured, with the use of some highly toxic substances such as cadmium chloride. But a researcher at St. Mary’s College, Maryland, says we are close to being able to create solar panels by painting them on a suitable surface, using nontoxic solutions. VOA’s George Putic reports.

VOA Blogs