Monday, June 20, 2011

Big week: Monday in Luxembourg

Eurozone finance ministers meeting in Luxembourg have failed to agree on releasing a loan payout to spare Greece from default. There is talk of Portugal being dragged further into the mire because of Greece's problems.

Greece is awaiting €12 billion earmarked for July as part of the country's €110 billion bailout negotiated last year. But Europe's finance ministers are insisting that the Greek government first introduce laws to cut the country's deficit and sell state assets.

This demand comes amid mounting domestic opposition, including a three-day parliamentary debate over a no-confidence vote that could bring down the government of Prime Minister George Papandreou.

Said Luxembourg's Prime Minister Jean-Claude Juncker who is chairing the eurozone meeting: “We forcefully reminded the Greek government that by the end of this month they have to see to it that we are all convinced that all the commitments they made are fulfilled.”

The Greek crisis is expected to dominate the EU summit in Brussels on Thursday and Friday this week. Fear of further contagion remains high. Germany is increasingly seen as the vital bulwark against an uncontrolled spiral of default in Europe.

There is growing speculation in financial circles that the 17-nation eurozone will not be able to survive in its present form. There are suggestions that Greece could be forced to leave as early as 2013. Portugal and Ireland may follow. Of course, at this stage it is only speculation. 


  1. Would it be so bad for us in Portugal if we left the euro? Our exports would suddenly become so much more attractive and our holiday potential affordable once again. It could be the making of us.

  2. What do other readers think? Would Portugal be better out of the euro? Should we go back to escudos?

  3. A Portuguese friend of mine said today: "the government never asked us, the people,if we wanted to go into the Euro - and yet they held a referendum over abortion! They didn't even hold a referendum for women... they asked men as well!" I think what she was trying to say is that the government, of whatever political persuasion, always has its own agenda.and rarely considers what the people think / want.
    Maybe it's time for a referendum on whether or not Portugal wants to be part of the EC as it is now? Whether or not it wants to go on being considered one of the poor relations, one of the PIGS, dictated to by Germany?

  4. I stated in a previous comment that the only way out of this mess is for Portugal to quit the single currency, revert to the Escudo and devalue - I stand by that view.

    It is clear from today's news that the UK has "washed its hands" as far as Greece is concerned with Boris Johnson and others stating that the country should be allowed to sink, and Jack Straw predicting the demise of the Eurozone in its present state in the near future.

    I have little sympathy with the Greeks (especially when I learned that their postmen retired at the age of 55 with a pension in the region of €50,000); their current reaction (strikes and demonstrations) to implemented and proposed austerity measures, given their financial situation, is lunacy.

    My Portuguese friends just shrug their shoulders and seem resigned to the forthcoming misery; it will be interesting to see if their attitude changes over the next two years.

  5. I saw your comment, Colin, attached to a previous blog, but do any of us know the implications of leaving the euro?
    That's the big question, surely? If there were no major-league consequences (ie. zero sanctions imposed because of unpaid debts)then quitting the euro sounds like a plan.
    I think the Portuguese people - certainly the ones i've spoken to - feel they couldn't leave the euro because of all the money Portugal owes.
    It may not concern estrangeiros, but it seems to concern the Portuguese.

  6. The only possible condition under which Portugal could ever leave the Euro is if it decided not to repay its debts. This would lead to economic mahem, sanctions and trade barriers. If Portugal left the Euro and devalued, the interest payments would still need to be paid in euros, bought by devalued Escudos. Euros would then have to be bought on the open market, costing Portugal dearly. It's money it doesn't have. We have to stick with the euro, stay in the club, work our way out and get smarter. If I can think of at least ten easy simplifications to make the economy run smoother, I am sure the Government can significantly add to the list if the will is there...

  7. "Paul, Algoz said...

    The only possible condition under which Portugal could ever leave the Euro is if it decided not to repay its debts."

    This is an oversimplification Paul - it is not a case of Portugal deciding not to repay its debts, it is not being able to repay its debts.

    Portugal is a very small country which produces virtually nothing for export and seems hell-bent on killing its tourism industry - it appears to be as short-sighted as Greece and will, I imagine, suffer the same fate.

  8. Calma, guys... Ok, Paul has covered the "opting out" of the euro, and that sounds pretty impossible. But what if Portugal was forcibly expelled (for being so small and effectively useless). Would it then be spared the ignominy of repaying its debts - and could it skip into a brighter new future with the escudo and no big brother breathing down its neck?
    Economic mayhem, by the way, is pretty much what we're on the road to anyway, isn't it?