Events in Portugal prove troika is not infallible
PORTUGAL'S prospects of exiting its EU/IMF bailout are unravelling by the hour. It is a salutary lesson, not least here, where an exit from our own bailout is increasingly regarded almost as a given. It should not be.
The speed of the meltdown in Portugal is remarkable.
The markets were caught utterly unawares, sending investors to their phones and computer terminals yesterday in a desperate effort to sell Portuguese stocks and bonds before prices fall any further.
Markets are pulling cash away from Portuguese investment because they fear that the governing coalition is about to fall.
A general election at a time when the population has become exhausted by austerity throws up a raft of potential outcomes – including, potentially, a messy row with Europe over bailout loans – just the kind of uncertainty markets hate.
On the face of things, it sounds like Portugal has a credibility problem. But the rights and wrongs of the current situation are by no means clear cut.
The latest crisis has erupted because the Portuguese economy is slumping deeper into its malaise, even as the government there has stuck with the terms of its bailout programme.
Portugal is floundering. Greece has little hope of returning to any kind of European normality in the near term. Cyprus is still reeling from the initial onset of its crisis.
Ireland still looks set to defy the odds by emerging from our bailout at the end of the year, but even here the country is back in recession.
It's a pretty dire record for the so-called experts of the European Commission, the European Central Bank and the IMF – the troika – who we are supposed to trust to help set our economic problems to rights.
If there is a credibility issue in Europe today, Lisbon may not be the first place we should be looking.