Question on Portugal and bailout

Discussion in 'Economics' started by Locutus, Feb 18, 2011.

  1. Locutus


    Perhaps there's someone around who can give some better argumentation than I can whether the following scenario is likely or not.

    Given the situation in which Ireland and Greece find themselves (subjugation of the banking system to central Europe, less freedom in fiscal policy and basically just looking super uncool), perhaps the fear of losing liberty is another reason that Portugal continues to refuse taking the aid package which central Europe wants to shove in there, other than that the government budget is all fine and dandy or so they say.

    Portugal doesn't have a lot of the problems that Greece and Ireland had. Their housing bubble was not massive (certainly not worse than teh Spanish one for ex.) and their fiscal budget was not as retarded as the Greek budget. What if Portugal really has no intention whatsoever to take this package? The alternative is to default on their bonds and "start over", basically. This is what countries like the PIIGS have always done before the Euro. In fact Greece spent most of its time in default before the Euro, which I think is preferable to being bailed out.

    I think if I were a Portuguese decision maker in the financial ministry I would consider the option of default. Is it possible that Portugal is contemplating this or do they really believe they do not need a bailout based upon the merits of their wonderful fiscal budget? As far as I can see there are no further reasons to reject the bailout and keep paying very high market rates.
  2. They're part of the EMU. They will do what needs to be done.