Tuesday, March 29, 2011

Third potential bail-out

Jose Socrates resigned as the prime minister of Portugal on Mar 24, 2011 after the parliament rejected the austerity plan that his government submitted mainly because the opposition party didn’t support the plan. He predicts that IMF/EU bail-out plan would be harsher than his government’s austerity measures which included 10% (at maximum) tax on pension.

The dismal states of Portugal’s economy would be even worse after the rejection. Ten year government bond’s yields are close to 8%, higher level compared with 10% of Ireland and 12% of Greece. The upcoming election will choose the new government, which would inevitably accept the third bail-out in Euro zone.

Opposition party’s myopic actions often take place. They oppose the incumbent’s plan for the sake of getting more sheets at the next election at the expense of national interest. True, the chances are that the opposition has any special plan to get out of the doomy states of its economy, though the probability of success looks very low from my perspective. This sort of myopic action should be punished in the long run, and I’m not sure why Social Democrats dare to do so.

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