Why giving Portugal an extra year to repay its loans is wrong!

ImageYesterday, the Portuguese government suggested that because it has been a “good-boy”, the EU may extend its repayment plan over an additional year.

The reason quoted: “EU-imposed Austerity measures have caused a drop in “expected” government tax revenues”.

Everyone in Portugal knows that Austerity is squeezing the life-blood out of the country’s economy.

Although there is “finally” some understanding that the nation’s debt needs to be reduced, and a somewhat “begrudging” acceptance that difficult choices need to be made: Receiving an “extra year” to repay debt, is going to do very little to improve economic sentiment or encourage business and job growth: it is a very small crumb!

The fact is, if Austerity is causing a drop in tax revenues, then it is Austerity that needs to be addressed, not the time-span of the repayments.

The Portuguese people have long known, that they are no longer running their own country’s economic affairs, and most appreciate that the Minister of Finance, Vitor Gasper, is a just “Puppet” put in place by the EU.

But they also know – as it is they who are suffering from it every day – “Austerity is killing the Portuguese economy”.

Unless something is done to reduce the outrageous levels of taxation being applied to their impoverished nation – whether they are given 1 extra year, or 10 – they will never be able to repay their outstanding debts.

As part of the Euro-zone, Portugal cannot devalue its currency nor adjust its interest rates, so in real terms, the Portuguese government can do very little to try and stimulate its economy.

But surely, those people in Portugal, charged with dictating and implementing the Austerity measures, must realise, that if the current measures are “reducing tax revenue”, then it is these measures which needs to be adjusted, not the repayment time-frame.

ImageThe recent “over-zealous” increases in tax may have “looked good on paper” to a bean-counting economist, but in the “real world” they are causing businesses to close and people to lose their jobs.

Worst still, the effect of these Austerity measures  are forcing many resourceful “entrepreneurs” to seek opportunities outside of the country, which means that those who could have helped the country – now and in the future –  are no longer resident: no longer paying tax, nor creating valuable tax-paying jobs, which the country so desperately needs.

Over the past 3-years Portugal has greatly tightened its methods of collecting taxes, (which will be a plus in the future). But unless it changes direction on Austerity measures, as suggested by the IMF, and reduces levels of taxation, pumping liquidity into the system and fosters an increase in economic activity, the country will have thousands of efficient tax-collectors, but too few incomes to tax.


We know the Finance Minister was appointed by Brussels, but it is time that Vitor Gasper took-off his “EU-blinkers” and looked at the “real” economy!


He may be an excellent “Bean-counter”, but until he realises that the harsh Austerity measures he is supporting are killing the Portuguese economy, and does something “concrete” to promote increased commercial activity, the country can be given an extra 10-years or 100-years, but that still wouldn’t guarantee that Portugal will ever be able to repay its debts.




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