Pedro Passos Coelho, Portugal’s prime minister, called an emergency cabinet meeting on Saturday in a bid to keep the country’s €78bn bailout programme on track after the constitutional court rejected austerity measures that were critical to meeting deficit-reduction targets.
Check out this article by the Financial Times discussing Portugal's failure to cut government spending. To keep on the their bailout plan, the county needs to follows to balance their budget buy cutting government spending. As we know, austerity measures (though good for controlling a deficit) have effects on the economy. Expansionary fiscal policy is a tool the government can use to stimulate growth. In Portugal's case they are faced with demands from the EU to correspond with the bailout program.
What is Portugal to do? Do you think Portugal's constitutional court made the right choice? Particular those of you who studies abroad in Europe, what do yo think is best for Portugal. What about the EU?
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Portugal needs to abide by the austerity measures if they plan to take advantage of the bailout money. The measures were put in place in order to make sure that the bailout money is used appropriately and efficiently. As we've seen before in Greece, if the bailout money isn't used correctly it will just be wasted and another bailout will be needed.
ReplyDeleteIt may not be best for Portugal currently to do so, but it is necessary. Obviously the EU would also like for them to accept these austerity measures as it would save them future bailout money.