Debt crisis: Portugal gets offer it can't refuse
8 April 2011
Irish and Greek and now Portuguese citizens can testify that falling into the clutches of the European commission for a bailout is a mobster's embrace, argues a Guardian columnist.
In the excellent TV series The Sopranos there is an episode where mobster Tony Soprano tells a small-time gambler why he let him play and lose in the big stakes game. "I knew you could never afford it, but your wife had the sports goods store," he explains after stripping the store of its assets and bankrupting it.
The Sopranos is available in Portuguese. Viewers will find out more about their fate than from most media coverage now Portugal is the latest economy to fall into the clutches of the European commission and, possibly the IMF. It is a mobster's embrace, as Irish and Greek citizens can testify.
The Portuguese government is reportedly requesting an emergency loan of €80bn, following an auction of government bonds where interest rates reached exorbitant levels. However, judging by the experience elsewhere in Europe the interest rate charged by the EU will be no lower than the unsustainable rate demanded by the bond markets.
The Irish and Greek bailouts were billed as an extreme but necessary step to support the solvency of the state. They have failed. Both economies have suffered further downgrades by the international credit ratings' agencies since the bailouts were announced, and financial markets are still pricing in a likely default. The Lisbon government, like those in Dublin and Athens, is likely to find it has exchanged the uncertain and costly financial market debt for the certainty of exorbitant debt from the EU and the IMF. As a result, the state will be less able to repay the debt over the long run, and more immediately it will be less able to sustain the debt servicing costs. Read full article in the Guardian...