Portugal to remain under troika supervision until 2045

The loosening to reduce deficits demanded by gabriel has long been granted to countries like portugal and ireland

When portugal exited the european bailout fund in may, the conservative government celebrated a "clean conclusion". It decided against providing preventive lines of credit to "financial independence" to maintain, said prime minister pedro passos coelho (slump with exit from bailout). But now the portuguese daily newspaper "público" reports that the country will have to wait more than three decades for it. Until at least 2045, portugal will still be controlled by international financiers, writes the coarse newspaper.

It is therefore no wonder that coelho is now not ruling out new tax increases to balance the dictated austerity budget. He has to find 1.3 billion euros because the constitutional court has once again thrown a spanner in the works of his austerity and shortage policy. The planned reduction of public sector salaries above 675 euros per month, the taxation of unemployment and sickness benefits, and restrictions on survivors’ pensions are also unlawful. "No decrease may be excluded", coelho on wednesday declared his willingness to continue imposing burdens on the struggling population and depriving it of purchasing power.

The aim is to meet the troika’s requirements even after the bailout has been withdrawn. The supervisors of the troika, which consists of the international monetary fund (imf), the eu commission and the european central bank (ecb), are to gradually withdraw from the country, leaving portugal with their policies for many years to come. In 2021, the imf is to withdraw from the six-monthly monitoring visits by the troika representatives, which are intended to examine not only the budget but also compliance with the stability targets.

The eu commission is to participate in the audits until 2037 and only withdraw once 75 percent of the 78 billion euros in aid has been repaid. Even until 2045, the rescue fund (efsf) is supposed to continue to control. It is hoped that the country will have repaid the loans in full by then. The financial and budgetary policy is to be monitored for more than 30 years to ensure that the loans are repaid. With a "early warning system" any possible defaults or deferrals are to be quickly uncovered.

Real debt reduction does not take place

Contrary to what was once planned, this country, like ireland, is not to start repaying the loans immediately, but only from 2023 onwards. In ireland, too, repayment on the st. Day, in order to be able to celebrate a "success" to be able to celebrate. That is why the second alleged model debtor, portugal, was given much more time.

Both countries made significant progress toward achieving their stability targets. Deficit targets once agreed have been revised upward several times. Like ireland, portugal continues to struggle to bring budget deficit down to the required three percent. At the end of 2013, ireland still had a deficit of 7.2 percent, while portugal managed 4.9 percent with one-off privatization proceeds. The start of repayments immediately caused deficits to rise sharply.

The deferral of aid loans until 2023 is a sign of how doubtful it is that they can ever be repaid. Both countries are moving further and further away from the stability target for public debt, according to which debt in relation to economic output should be only 60 percent. In ireland, the ratio at the end of the year was 124 percent and in portugal already 129 percent. The share of tax revenues that must be spent on debt service continues to rise. It does not change the fact that countries can again borrow money on the capital markets at more favorable conditions.

Since the criteria and targets have long been softened, the criticism of the revisions by federal minister of economics sigmar gabriel (spd) can also be described as premature summer theater. The had suggested giving crisis countries more time to reduce deficits by easing conditions for reforms. But this is only a continuation of what has been going on for a long time anyway. He demanded "more honesty in the debate".

If this was meant seriously, it had to include the admission that there must be debt relief for the crisis countries if they are to have a chance again. Because their debts are "rescue" only really exploded. Real debt reduction does not take place. And if portugal does succeed in paying off aid loans from 2023 onwards, this will in all likelihood only happen through new debts elsewhere. Crisis countries needed enormous growth rates to pay off debts in real terms. Such rates are not in sight. Portugal’s economy actually shrank again by 0.7 percent in the first quarter of 2014 compared with the previous quarter.

Now, however, a new trick is apparently being used to generate growth, as illegal businesses such as drug trafficking and prostitution are being included in economic output, thereby also reducing the deficit and debt ratio ("growth" through drug trafficking, prostitution and tobacco smuggling). Portugal has already led the way by increasing economic output by 700 million euros. The share of such transactions, which had already been partially included, increased to 13% of the economic output, which is now only estimated.