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07 February 2012

Portugal's economic future in limbo

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The situation in Portugal remains uncertain as the government, economists and investors take opposing views. The government is optimistic, economists expect a haircut, and investors are cautious.

Analysts, creditors, economists, the country's politicians and the Portuguese people themselves all take different views on the situation.

In light of the eurozone crisis, Portuguese finance minister, Vitor Gaspar, has been trying to put his country in a good light. Mounting debt, gaping holes in the budget, weak growth rates and poor economic performance are all to be blamed for Portugal's dependence on an EU bailout package. Finance minister Gaspar says Lisbon can still turn the tide. "For more than a decade, the macro-economic imbalance and structural weaknesses have increased", Gaspar explains.

Gaspar needs broad support for the reforms. The package, he says, will protect the country and win precious time. "That's time that Portugal needs to regain the trust we need to be able to reduce the deficit via the markets by 2013." The troika of EU observers, the European Central Bank and the IMF believe Portugal is on a positive track with its reform package - it could lead to a slight increase in growth rates.

Some experts argue that if Greece defaults on its debt, other countries like Portugal will go the same way because the underlying problems - in all the eurozone's troubled States - are thought to be the same. A recent Institute for the World Economy (IfW) study, however, suggest there are some differences between Greece, Portugal and Spain. "The structure of the crises, as well as what led up to the current problems, are different - and solutions in these three countries will have to be different too", the report says. In Portugal's case, the study says low economic output, and private and public tax burdens, created its problems and the country now needs quick action to turn things around.

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© Deutsche Welle

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