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

Lesotho Faces New Round of Violence, Political Crisis

Brutal killing of military officer has sent former leaders back into S. Africa where they're watching anxiously as regional officials head in to try to restore peace More

Video US Diplomat Expects Adoption of Srebrenica Anniversary Resolution

Samantha Power says there's broad consensus about killings in Bosnia's war, but Russia calls resolution 'divisive,' backs countermeasure at UN More

UN Report Exposes Widespread Boko Haram Atrocities

Damning report graphically details pattern of vicious, widespread atrocities committed by Islamist militants 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.
Family of American Marine Calls for Release From Iranian Prisoni
X
Heather Murdock
July 01, 2015 8:59 PM
As the crowd of journalists covering the Iran talks swells, so too do the opportunities for media coverage.  Hoping to catch the attention of high-level diplomats, the family of American-Iranian marine Amir Hekmati is in Vienna, pleading for his release from an Iranian prison after nearly 4 years.  VOA’s Heather Murdock reports from Vienna.
Video

Video Family of American Marine Calls for Release From Iranian Prison

As the crowd of journalists covering the Iran talks swells, so too do the opportunities for media coverage.  Hoping to catch the attention of high-level diplomats, the family of American-Iranian marine Amir Hekmati is in Vienna, pleading for his release from an Iranian prison after nearly 4 years.  VOA’s Heather Murdock reports from Vienna.
Video

Video UK Holds Terror Drill as MPs Mull Tunisia Response

After pledging a tough response to last Friday’s terror attack in Tunisia, which came just days before the 10th anniversary of the bomb attacks on London’s transport network, British security services are shifting their focus to overseas counter-terror operations. VOA's Henry Ridgwell has more.
Video

Video Obama on Cuba: This is What Change Looks Like

President Barack Obama says the United States will soon reopen its embassy in Cuba for the first time since 1961, ending a half-century of isolation. VOA White House correspondent Luis Ramirez reports.
Video

Video Hate Groups Spread Influence Via Internet

Hate groups of various kinds are using the Internet for propaganda and recruitment, and a Jewish human rights organization that monitors these groups, the Simon Wiesenthal Center, says their influence is growing. The messages are different, but the calls to hatred or violence are similar. VOA's Mike O’Sullivan reports.
Video

Video US Silica Sand Mining Surge Worries Illinois Residents, Businesses

Increased domestic U.S. oil and gas production, thanks to advances known as “fracking,” has created a boom for other industries supporting that extraction. Demand for silica sand, used in fracking, could triple over the next five years. In the Midwest state of Illinois, people living near the mines are worried about how increased silica sand mining will affect their businesses and their health. VOA’s Kane Farabaugh has more in this first of a series of reports.
Video

Video Blind Somali Journalist Defies Odds in Mogadishu

Despite improving security in the last few years, Somalia remains one of the most dangerous countries to be a journalist – even more so for someone who cannot see. Abdulaziz Billow has the story of journalist Abdifatah Hassan Kalgacal, who has been reporting from the Somali capital for the last decade despite being blind.
Video

Video Texas Defies Same-Sex Marriage Ruling

Texas state officials have criticized the US Supreme Court decision giving same-sex couples the right to marry nationwide. The attorney general of Texas says last week's decision did not overrule constitutional "rights of religious liberty," and therefore officials performing wedding services can refuse to perform them for same-sex couples if it is against their religious beliefs. Zlatica Hoke reports on the controversy.
Video

Video Rabbi Hits Road to Heal Jewish-Muslim Relations in France

France is on high alert after last week's terrorist attack near the city Lyon, just six months after deadly Paris shootings. The attack have added new tensions to relations between French Jews and Muslims. France’s Jewish and Muslim communities also share a common heritage, though, and as far as one French rabbi is concerned, they are destined to be friends. From the Paris suburb of La Courneuve, Lisa Bryant reports about Rabbi Michel Serfaty and his friendship bus.
Video

Video Saudi Leaks Expose ‘Checkbook Diplomacy’ In Battle With Iran

Saudi Arabia’s willingness to wield its oil money on the global diplomatic stage appears to have been laid bare, after the website WikiLeaks published tens of thousands of leaked cables from Riyadh’s Ministry of Foreign Affairs. VOA's Henry Ridgwell reports.
Video

Video Nubians in Kenya Face Land Challenges

East Africa's ethnic Nubians have a rich cultural history that dates back thousands of years, but in Kenya they are facing hardships, including the loss of lands they have lived on for generations. They say the government has reneged on its pledge to award them title deeds for the plots. VOA's Lenny Ruvaga reports.
Video

Video Military Experts Question New Russian Tank Capabilities

Russia has been showing off its new tank design – the Armata T-14. Designers claim it is 20 years ahead of current Western designs - and driving it feels like playing a computer game. But military analysts question those assertions, and warn the cost could be too heavy a burden for Russia’s struggling economy. Henry Ridgwell reports.
Video

Video In Kenya, Police Said to Shoot First, Ask Questions Later

An organization that documents torture and extrajudicial killings says Kenyan police were responsible for 1,252 shooting deaths in five cities, including Nairobi, between 2009 and 2014, representing 67 percent of all gun deaths in the areas reviewed. Gabe Joselow has more from Nairobi.

VOA Blogs