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

Video For West Ukraine City, Conflict Far Away Yet Near

Physically and culturally close to Western Europe, Lviv feels solidarity with compatriots in country’s east but says they need to decide own future More

West African Women Disproportionately Affected by Ebola

Women's roles in families and the community put them at greater risk for contracting the disease, officials say More

Video NASA's MAVEN Spacecraft Arrives at Mars

Mars Atmosphere and Volatile Evolution craft will measure rates at which gases escape Martian atmosphere into space More

This forum has been closed.
Comments
     
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.
NASA’s MAVEN Probe Enters Mars Orbiti
X
September 22, 2014 9:20 PM
NASA’s newest Mars probe, called MAVEN, has successfully entered its designated orbit around the Red Planet. Scientists will use its sophisticated instruments to try to learn what happened to the atmosphere Mars had a few billion years ago. VOA’s George Putic has more.
Video

Video NASA’s MAVEN Probe Enters Mars Orbit

NASA’s newest Mars probe, called MAVEN, has successfully entered its designated orbit around the Red Planet. Scientists will use its sophisticated instruments to try to learn what happened to the atmosphere Mars had a few billion years ago. VOA’s George Putic has more.
Video

Video For West Ukraine City, Conflict Far Away Yet Near

The western Ukrainian city of Lviv prides itself on being both physically and culturally close to Western Europe. The Russian-backed separatists in the eastern part of the country are 1,200 kilometers away, and seemingly even farther away in their world view. Still, as VOA’s Al Pessin reports, the war is having an impact in Lviv.
Video

Video Saving Global Fish Stocks Starts in the Kitchen

With an estimated 90 percent of the world’s larger fish populations having already vanished, a growing number of people in the seafood industry are embracing the concept of sustainable fishing and farming practices. One American marine biologist turned restaurateur in Thailand is spreading the word among fellow chefs and customers. VOA Correspondent Steve Herman reports from Bangkok.
Video

Video Chinese Admiral Key in China’s Promotion of Sea Links

China’s President last week wrapped up landmark visits to India, Sri Lanka and Maldives, part of a broader campaign to promote a new “Maritime Silk Road” in Asia. The Chinese government’s promotion efforts rely heavily on the country’s best-known sailor, a 15th century eunuch named Zheng He. VOA's Bill Ide reports from the sailor’s hometown in Yunnan on the effort to promote China’s future by recalling its past.
Video

Video Experts Fear Ebola Outbreak ‘Beyond Our Capability to Contain’

Each day brings with it new warnings about the deadly Ebola outbreak already blamed for killing more than 2,600 people across West Africa. And while countries and international organizations like the United Nations are starting to come through on promises of help for those most affected, the unprecedented speed with which the virus has spread is raising questions about the international response. VOA's Jeff Seldin has more from Washington.
Video

Video Natural Gas Export Plan Divides Maryland Town

A U.S. power company that has been importing natural gas now wants to export it. If approved, its plant in Lusby, Maryland, would likely be the first terminal on the United States East Coast to export liquefied natural gas from American pipelines. While some residents welcome the move because it will create jobs, others oppose it, saying the expansion could be a safety and environmental hazard. VOA’s Deborah Block examines the controversy.
Video

Video Difficult Tactical Battle Ahead Against IS Militants in Syria

The U.S. president has ordered the military to intensify its fight against the Islamic State, including in Syria. But how does the military conduct air strikes in a country that is not a U.S. ally? VOA correspondent Carla Babb reports from the Pentagon.
Video

Video Iran, World Powers Seek Progress in Nuclear Talks

Iran and the five permanent members of the U.N. Security Council plus Germany, known as the P5 + 1, have started a new round of talks on Iran's nuclear program. VOA State Department correspondent Pam Dockins reports that as the negotiations take place in New York, a U.S. envoy is questioning Iran's commitment to peaceful nuclear activity.
Video

Video Migrants Caught in No-Man's Land Called Calais

The deaths of hundreds of migrants in the Mediterranean this week has only recast the spotlight on the perils of reaching Europe. And for those forunate enough to reach a place like Calais, France, only find that their problems aren't over. Lisa Bryant has the story.
Video

Video Westgate Siege Anniversary Brings Back Painful Memories

One year after it happened, the survivors of the terror attack on Nairobi's Westgate Shopping Mall still cannot shake the images of that tragic incident. For VOA, Mohammed Yusuf tells the story of victims still waiting for the answer to the question 'how could this happen?'
Video

Video Whaling Summit Votes to Uphold Ban on Japan Whale Hunt

The International Whaling Commission, meeting in Slovenia, has voted to uphold a court ruling banning Japan from hunting whales in the Antarctic Ocean. Conservationists hailed the ruling as a victory, but Tokyo says it will submit revised plans for a whale hunt in 2015. Henry Ridgwell reports from London.
Video

Video A Dinosaur Fit for Land and Water

Residents and tourists in Washington D.C. can now examine a life-size replica of an unusual dinosaur that lived almost a hundred million years ago in northern Africa. Scientists say studying the behemoth named Spinosaurus helps them better understand how some prehistoric animals adapted to life on land and in water. The Spinosaurus replica is on display at the National Geographic museum. VOA’s George Putic has more.
Colonel Steve ‘Spiros’ Pisanos left Greece and came to the U.S. to learn to fly. He flew fighters for the Allies in World War II, narrowly escaping death multiple times.Colonel Steve ‘Spiros’ Pisanos left Greece and came to the U.S. to learn to fly. He flew fighters for the Allies in World War II, narrowly escaping death multiple times.

AppleAndroid