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

Koreas Mark 61st Anniversary of War Armistice

Muted observances on both sides of heavily-armed Demilitarized Zone that separates two decades-long enemies More

Judge Declares Washington DC Ban on Public Handguns Unconstitutional

Ruling overturns capital city's prohibition on carrying guns in pubic More

Pricey Hepatitis C Drug Draws Criticism

Activists are using the International AIDS Conference to criticize drug companies for charging high prices for life-saving therapies 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.
Students in Business for Themselvesi
X
Mike O'Sullivan
July 26, 2014 11:04 AM
They're only high school students, but they are making accessories for shoes, fabricating backpacks and doing product photography - all through their own businesses. It's the result of a partnership between a non-profit organization that teaches entrepreneurship and their schools. VOA's Mike O'Sullivan and Deyane Moses met the budding entrepreneurs near Los Angeles.
Video

Video Students in Business for Themselves

They're only high school students, but they are making accessories for shoes, fabricating backpacks and doing product photography - all through their own businesses. It's the result of a partnership between a non-profit organization that teaches entrepreneurship and their schools. VOA's Mike O'Sullivan and Deyane Moses met the budding entrepreneurs near Los Angeles.
Video

Video Astronauts Train in Underwater Lab

In the world’s only underwater laboratory, four U.S. astronauts train for a planned visit to an asteroid. The lab - called Aquarius- is located five kilometers off Key Largo, in southern Florida. Living in close quarters and making excursions only into the surrounding ocean, they try to simulate the daily routine of a crew that will someday travel to collect samples of a rock orbiting far away from earth. VOA’s George Putic has more.
Video

Video Not Even Monks Spared From Thailand’s Junta-Backed Morality Push

With Thailand’s military government firmly in control after May’s bloodless coup, authorities are carrying out plans they say are aimed at restoring discipline, morality and patriotism to all Thais. The measures include a crackdown on illegal gambling, education reforms to promote students’ moral development, and a new 24-hour phone hotline for citizens to report misbehaving monks. Steve Sandford reports from Bangkok.
Video

Video Virtual Program Teaches Farming Skills

In a fast-changing world beset by unpredictable climate conditions, farmers cannot afford to ignore new technology. Researchers in Australia are developing an online virtual world program to share information about climate change and more sustainable farming techniques for sugar cane growers. As VOA's Zlatica Hoke reports, the idea is to create a wider support network for farmers.
Video

Video Airline Expert: Missile will Show Signature on Debris

The debris field from Malaysia Airlines Flight 17 is spread over a 21-kilometer radius in eastern Ukraine. It is expected to take investigators months to sort through the airplane pieces to learn about the missile that brought down the jetliner and who fired it. VOAs Carolyn Presutti explains how this work will be done.
Video

Video Treatment for Childhood Epilepsy Heats up Medical Marijuana Debate

In the United States, marijuana is classed as an illegal drug by the federal government. But nearly half the states have legalized it, to some degree. Proponents say some strains of marijuana might have exceptional health benefits, for treating pain or inflammation in chronic conditions such as cancer, multiple sclerosis and epilepsy. Shelley Schlender reports on a strain of medical marijuana developed in Colorado that is reputed to reduce seizures in childhood epilepsy
Video

Video Airbus Adds Metal 3D Printed Parts to New Jets

By the end of this year, European aircraft manufacturing consortium Airbus plans to deliver the first of its new, extra-wide-body passenger jets, the A350-XWB. Among other technological innovations, the new plane will also incorporate metal parts made in a 3-D printer. VOA's George Putic has more.
Video

Video AIDS Conference Welcomes Exciting Developments in HIV Treatment, Prevention

Significant strides have been made in recent years toward the treatment and prevention of HIV, the virus that causes AIDS. This year, at the International AIDS Conference, the AIDS community welcomed progress on a new pill that may prevent transmission of the deadly virus. VOA’s Anita Powell reports from Melbourne, Australia.
Video

Video IAEA: Iran Turns its Enriched Uranium Into Less Harmful Form

Iran has converted its stockpiles of enriched uranium into a less dangerous form that is more difficult to use for nuclear weapons, according to the United Nations’ Atomic Energy Agency. The move complies with an interim deal reached with Western powers on Iran's nuclear program last year, in exchange for easing of sanctions. Henry Ridgwell reports for VOA from London.

AppleAndroid