Data to be released tomorrow may show the economy shrank 0.3 percent in the first quarter, economists surveyed by Bloomberg forecast, matching the contraction of the previous three months. The slump may deepen as the government starts executing the spending cuts and tax increases it agreed to in return for its 78 billion-euro ($111 billion) aid package.
“With the adjustment measures, the outlook for Portugal in the next few months isn’t good, particularly in terms of consumption,” said Francisco Vidal, an economist at Intermoney Valores SV SA in Madrid. Portugal, Ireland and Greece will make up the lagging group of European nations from an economic standpoint, he said.
As borrowing costs surged to record levels last month, Portugal became the third euro-area country to seek aid, following the bailouts of Greece and Ireland in 2010. The steps the government says will tame the euro region’s fourth-biggest budget deficit will lead the economy to contract 2 percent this year, twice the previous forecast, Finance Minister Fernando Teixeira dos Santos said on May 5.
The country’s two-year bonds now yield 11.6 percent, more than the 9.4 percent for 10-year debt. The spread means there is more perceived risk in lending to Portugal for two years than for a decade.
Throw in the UK's austerity-created recession and Spain's austerity-created massive unemployment and at this point the only real European engine of growth left is Germany. Watch out for conservatives lying to you and saying that these recessions were caused by "socialism". These recessions were caused by implementing the same exact austerity policies that American conservatives are demanding here.
If you want to know what John Boenher's demand for trillions of dollars in spending cuts will do to our economy, look no further than austere Europe.
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