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http://www.telegraph.co.uk/finance/financialcrisis/9151804/Pimco-chief-Mohamed-El-Erian-expects-second-Greece-in-Portugal.html

Mohamed El-Erian, Pimco’s chief executive, said Portugal will need a second rescue as the original package of €78bn (£65bn) falls short, setting off a political storm over EU rescue costs.

“Unfortunately, that is how it will be. It will make the financial markets nervous because they are worried about a participation of the private sector,” he told Der Spiegel over the weekend.

http://www.guardian.co.uk/business/2012/mar/18/portugal-next-greece-mohamed-el-erian

Portugal will follow Greece to be the next eurozone country to falter, according the boss of the world's largest private sector bond fund.

Like Greece, it will need extra cash from Brussels to stop the country going bust, Pimco chief executive Mohamed El-Erian told the German magazine Der Spiegel.

Asked whether he expected Portugal to have become the next Greece by the end of this year, he said: "Yes, unfortunately that will be the case."

Portugal's economy is forecast to contract 3.3% this year as the government implements austerity measures under a €78bn (£65bn) bailout from the European Union and International Monetary Fund.

Looks like the Euro elite will have most of the year then to pretend Portugal isn't a problem...

Or Pimco has bet Portugal will need a bailout?

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  • 4 weeks later...

Looks like the Euro elite will have most of the year then to pretend Portugal isn't a problem...

Or Pimco has bet Portugal will need a bailout?

Worse, Citibank think Portugal will need a haircut. Even though everyone said Greece was a one-off.

Portugal Shuffles To The Front Of The Debt Queue

I finally got round to reading this excellent analysis of Portugal by Edward Hugh. The guy is always very thorough, with charts and graphs and so on.

This is from Citibank. So, pain for banks as well as people. Austerity ain't workin' ?

In earlier assessments of its debt position, we argued that Portugal would not be able to move on to a viable fiscal path without a haircut of 35% by the end of 2012 or in 2013. While we acknowledge that Portugal is in many aspects different from Greece, we now conclude that the size of the haircut will need to be higher, to the tune of 50%, most likely taking the form of a reduction in the debt held by the private sector.

If done in 2012, a 50% haircut in the nominal value of Portuguese government debt would help to cap the peak in the debt-to-GDP ratio at around 113% in 2015. Hence, in our scenario, Portugal will need around €70bn extra funding from the Troika (plus sweeteners for the PSI) in order to close the funding gap until the end of 2015.

Anyway, the IMF still thinks internal devaluation will bring about export led growth. Despite the fact that Portugal's only real export market is . . . Spain.

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If you look at the data for the Portuguese economy it is hard to avoid the view that not only is there trouble ahead there is trouble now. As the quote below indicates Portugal is looking more and more like it is repeating Greece's performance with all that implies.

Industrial Production

In February, Industrial Production year-on-year change rate was -6.8%, down by 1.4 percentage points from the rate observed in the previous month. Manufacturing Industry year-on-year change rate was -2.4% (-0.8% in January).

If we look at the underlying index we now have a reading of 82 where 2005=100. Portugal’s statistics agency raises the number to 86.5 with its calendar and seasonal adjustments.

Retail Sales

The retail trade turnover index (seasonally adjusted and at constant prices) registered a year-on-year change rate of -8.9% in February (-7.8% in January).

If my attempt to translate Portuguese is working correctly the real level of Portuguese retail sales is 75 where 2005=100. It is quite a seasonal series but if we look at the last two Februaries we see 83 in 2011 and 86.2 in 2010.

So we can safely conclude that domestic demand in Portugal’s economy is on a downward trajectory.

http://www.mindfulmoney.co.uk/wp/shaun-richards/euro-zone-imposed-austerity-is-destroying-portugals-economy-and-its-future-prospects/

Exactly how is yet more austerity going to help that sort of situation?

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Mohamed El-Erian, Pimco’s chief executive, said Portugal will need a second rescue

And why not? There's nothing like a good sequel.

"Greece II, The Revenge" was so successful, the producers are already planning "Greece III, The Apotheosis".

It's only natural for Portugal to follow suit.

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And why not? There's nothing like a good sequel.

"Greece II, The Revenge" was so successful, the producers are already planning "Greece III, The Apotheosis".

It's only natural for Portugal to follow suit.

The tragedy is, Portugal's problem fundamentally was growth, not debt. So the bailout gave it a problem it didn't have, while killing any chance of growth stone dead.

That blog report mentions the retail sector . . well, if you slash wages 12% and hike taxes. it can't be hard to fathom which sector is going to go down the toilet fast and first.

The blog comments also note some special agricultural problems for Portugal . . . like drought.

Like the Euro itself, the 'one size fits all' of EU policies is simply totally divorced from reality on the ground.

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The tragedy is, Portugal's problem fundamentally was growth, not debt. So the bailout gave it a problem it didn't have, while killing any chance of growth stone dead.

That blog report mentions the retail sector . . well, if you slash wages 12% and hike taxes. it can't be hard to fathom which sector is going to go down the toilet fast and first.

The blog comments also note some special agricultural problems for Portugal . . . like drought.

Like the Euro itself, the 'one size fits all' of EU policies is simply totally divorced from reality on the ground.

What about if you pay wages below inflation, hike stealth taxes and prop up a housing bubble that diverts more disposable income to mortgages? Would a retail sector in a country doing that perform any better?

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This is an acedotal but I have just returned from a fortnight with the in-laws in Portugal, so fits in with this topic. We have been visiting them twice a year for the last 20 years. The differences I noticed this time.

1. Many more police on the streetsof Lisbon and also doing random stops on cars - according to the Sister-in-law checking on road tax and insurance details.

2. Twice I saw people rummaging through bins - the first guy looked homeless and hungry, the second was a well dressed woman with some dogs.

3. The young Portuguese all say they would leave the country if they could - uncertain where to go though (Brazil is not viewed positively

My wives family are a long way from the bottom of the pile, but you can sense their frustration at the lack of opportunities.

Squeeze

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3. The young Portuguese all say they would leave the country if they could - uncertain where to go though (Brazil is not viewed positively

Interesting - I heard an item on the Today programme a few weeks ago about migration from Portugal to Brazil, suggesting that it was happening on a significant scale because of the shared language and Brazil's growing economy.

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Interesting - I heard an item on the Today programme a few weeks ago about migration from Portugal to Brazil, suggesting that it was happening on a significant scale because of the shared language and Brazil's growing economy.

Its Brazil or Angola.

G-string or shot.

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If you look at the data for the Portuguese economy it is hard to avoid the view that not only is there trouble ahead there is trouble now. As the quote below indicates Portugal is looking more and more like it is repeating Greece's performance with all that implies.

http://www.mindfulmoney.co.uk/wp/shaun-richards/euro-zone-imposed-austerity-is-destroying-portugals-economy-and-its-future-prospects/

Exactly how is yet more austerity going to help that sort of situation?

Thanks for this. I found the discussion in the comments section about the scale of emigration from Portugal fascinating too. And a drought! It is almost Biblical the way everything is hitting Portugal at the same time.

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Thanks for this. I found the discussion in the comments section about the scale of emigration from Portugal fascinating too. And a drought! It is almost Biblical the way everything is hitting Portugal at the same time.

Yes . . . a plague of Eurocrats is the last thing it needs.

The emigration issue is interesting . . . there are a lot of countries in Europe that have similar history of exporting unemployment . . . Ireland, Poland . . . and now these are being joined by Greek, Romanian and Latvian hordes. Well, they can't all go to Germany.

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Well, they can't all go to Germany.

The Germans recently passed a law that immigrant workers arriving in Germany from within the EU cannot claim a hitherto availaible form of unemployment benefit set up to help people relocate to find work across national borders.

This plugs a rather obvious hole in their austerity schemes whereby the people they shaft in Greece could simply move to Germany for work. This new law is illegal under the terms of the EU constitution.

So despite inventing the phrase themselves, the Germans clearly no longer believe that Arbeit macht frei- they want to keep the unemployed of europe exactly where they are- not in Germany. :lol:

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  • 434 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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