Although Portugal had been granted a three year, $108 billion bailout in May of 2011 through the International Monetary Fund and the European Union, it is now turning the other cheek and saying no to any more bailouts. The move is thought to be due to the 2011 loan setting off enormous protests brought on by the government forcing huge spending cuts on the populace in order to meet the requirements set forth in the bailout plan. When Portugal exits its plan this month, it will be doing so without a defensive line of credit. However the country will be moving towards a stable economy after the last few years of turmoil.
The Prime Minister of Portugal announced that the country would no longer have to answer to creditors from other lands after the three year bailout from 2011 ends on May 17 of this year. He also stated that he felt comfortable with the country’s ability to move ahead in the future without any preventative measures put down. He feels assured that the European partners of his country will stand behind whatever decision his government makes. The European Commission has taken a look at the situation and has assured Portugal that it will support the country in whatever conclusion it makes.
The plan to leave the bailout without any monetary safety net is a huge success for the government of Portugal. It has contributed to investor confidence by adhering to the drastic measures it took in order to be able to keep to the bailout guidelines. By making it through the strict rules that came with the IMF and E.U. loan, Portugal has achieved the right to a safe conduct pass from the robust international market. The road to getting to where Portugal is now has not been an easy one. The Supreme Court of the country had refused to concede to measures set out in the loan plan. Although the government started off the bailout on rocky ground and lost popularity with its populace, it managed to stabilize itself and start to recover in the summer of 2013, resulting in a Portugal that says no to any more would-be offers of bailouts.
Last week Portugal passed the final examination by its creditors of its economic loan, notching up another level in European partner confidence. It goes a long way in showing that investors are accepting of Portugal’s peril and that is a step in the right direction where the country is concerned. The country’s 10 year bonds are being traded at nearly four percent right now, the closest to its eight year low, after it had peaked at almost 17 percent at the height of its deficit crisis in 2012. It is the equivalent to 220 basis points over the same amount of German bonds, which translates into one one-thousandth of a percent when used as a unit of measure in financial instruments.
Portugal is now in a strong condition to finish the merging of the public purse and strengthen constitutional reforms which will be needed to maintain continual growth and job formation. European Union financiers are anticipated to give the nod to Portugal’s leave of the bailout term during the two day ministers’ meeting that will be held this week. The ministers agree that Portugal has enough financial accumulation to be able to withstand any shock the market may produce this year. This bodes well for the country, which is set to be debt free from the IMF in 2024 and the E.U. in 2042, helping along Portugal as it says no to any more bailouts in the near future.
Opinion by Korrey Laderoute