Dream over, back to reality
More than anything, the football World Cup is about money. Portugal stood to earn loads of it had its joint bid with Spain succeeded in Zurich yesterday. Billions of euros were up for grabs. It was reckoned that the revenues for Iberia would have been six and a half times greater than the expenditure needed to host the event.
As it turns out, Iberia's bid was but a dream. With hopes for 2018 dashed, it's back to worrying about the economy today. And that hoary old question persists: will Portugal need a bailout or not?
Prime Minister José Sócrates still insists not. “Sometimes you win, sometimes you lose,” he said after the announcement in Zurich. He was more upbeat on a possible bailout and the humiliation of having Portuguese financial affairs dictated by Brussels. The 2011 austerity budget with its tax rises and public sector pay cuts will do the trick, he believes.
German Economy Minister Rainer Bruederle says he doesn't think either Portugal or Spain will need a euro zone rescue plan. However, this runs counter to what many economists have been saying for weeks now, namely that it's not a question of if, but when.
"I hope the IMF does not turn to Portugal but I don't see this as an extraordinary problem," said Fernando Ulrich, chief executive of Banco BPI. "It is Germany that will decide if it comes, not the Portuguese government.”
If Portugal is deemed to need a bailout, many analysts believe Spain will inevitably be next. That would require a far mightier rescue effort.
The current economic plight of Portugal and Spain will be high on the agenda at the Iberian-American summit meeting in Argentina today and tomorrow. No doubt the Brazilian and other Latin American leaders will commiserate with those from Portugal and Spain over the failure in Zurich yesterday. This could be a good opportunity for the former colonial masters to pass around the hat.