Belfast Telegraph

Saturday 22 November 2014

Portugal's tall order to return to prosperity

Portuguese Prime Minister Jose Socrates
Portuguese Prime Minister Jose Socrates

Now the hard work begins for Portugal. While its caretaker government has managed to negotiate a €78bn (£70bn) bailout deal, the terms which the Iberian Peninsula country must adhere to in exchange for the cash are certainly optimistic.

For the remainder of this year it must cut its budget deficit to 5.9% from the current rate of 9.1%. A tall order in itself but once it's reached that threshold it must then cut the deficit further to 3% by 2013.

Acting prime minister Jose Socrates admits the terms are going to be hard to meet but hasn't been surprised by the demands placed on his country, likening them to a deal which was thrown out by the Portuguese parliment only a matter of months ago. In fact, he's suggested the terms of the bailout are less severe than they were for the Republic or Greece. That won't become clear until we get an idea of the interest rate being charged on the loan which is being discussed at the moment, but you can be sure Enda Kenny will be keen to hear the outcome.

But he needn't get too shirty if Portugal does negotiate a less harsh deal as its financial system isn't in as bad a state as either the Republic of Ireland's or Greece's, both of which have ingrained problems with their banks and economic structure respectively.

In some ways Mr Socrates's problems are easier to solve. High unemployment, low education levels and a large public sector are the types of burdens governments around the world have had experience in defeating. A broken banking system, on the other hand, is a much more difficult proposition to deal with.

And you have to take into account Portugal's previous in this environment. This latest bailout will be its third emergency loan from the International Monetary Fund in the past 34 years after accepting help in 1977 and 1983.

You would think the economies of developed countries in the European Union would have come a long way since then but it seems we haven't progressed much.

Let's hope this is the start of the long road to recovery for Portugal. Although there are many more details to be finalised, the quicker the ball starts rolling, the quicker Jose Socrates's country can get back on its feet.

Of course, time will tell whether he's more than just acting prime minister after the country's elections on June 5.

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