The Greek one suffered a fate worse than the Portuguese one: the Socrates of Athens was sentenced to death on a trumped-up allegation of corrupting the nation’s youth; the Sócrates of Portugal has resigned after losing a vote in parliament on a package of austerity measures designed to avoid a humiliating IMF/ECB bail-out, after the fashion (coincidentally) of Greece.
His Grace won’t say he told you so.
But he told you so.
Portugal's national debt stands at a colossal 83 per cent of GDP. At least the leaders of Greece and Ireland remained in office long enough to negotiate a rescue package. The sudden resignation of José Sócrates means that Portugal enters a period of political limbo, which can only induce further fiscal insecurity and rumble the markets further. Their economy is now teetering on the edge: without the ability to lower interest rates, the choice was between the rock of spending cuts or the hard place of tax increases. The bizarre thing is that the deficit-cutting austerity package which has just been rejected by the Social Democrats is precisely what will now be forcibly imposed by the EU/IMF. And it will be painful. As Ireland has discovered, even with a change of government, he who pays the piper calls Beethoven’s ‘Ode to Joy’.
By curious coincidence, EU leaders meets today to put together a €440bn rescue fund to halt the contagion. Sadly, the inoculation comes too late, though it is unlikely that the antidote would have been effective anyway. Portugal is steeped in maturing debt and is having to sell €20bn of bonds simply to finance its budget, at levels of interest which the markets believe to be unsustainable.
And so it came to pass that Portugal had her sovereignty removed.
And around £3bn of the savings which George Osborne preciously set out in yesterday’s budget will be extracted to the European Commission’s bailout fund, and Britain will be forced to throw good pounds after bad euros. The Chancellor giveth and Brussels taketh away.
And while the people were distracted by wars and rumours and wars in the Middle East, and by earthquake, flood and nuclear fallout in the Far East – and not forgetting David Beckham’s tattoo – the smoke and mirrors of our economic and political governance continued. And the masses were heartily entertained.
Spain is next, by the way.
But David Beckham is certain to have another tattoo by then.
