A leading economist has said Portugal was wrong to try and ‘win the austerity beauty pageant’ and become the Troika’s favourite student. It did nothing for the country’s economy – and the way things are going will simply become “explosive”.
Belgian economist Paul de Grauwe (pictured), a professor at the London School of Economics, was talking to Lusa news agency, during a business school conference in Lisbon.
“Winning the austerity beauty pageant was a bad idea,” he said. “Portugal could have been the worst student in the class. That would have been better for the economy.”
De Grauwe’s reasoning is that austerity measures brought in over an extended period of time lessen economic impact.
He also defended a union between Portugal and other southern European countries to combat the way they are treated.
“When Portugal, Greece, Ireland and Spain implement austerity measures, other Northern European countries should do the opposite and stimulate their economy. You have influence in the European Commission, but you don’t use it,” he added – referring to what he sees as the government’s clear lack of initiative.
A former member of the Belgian Federal Parliament, de Grauwe maintains that if countries with strong economies encouraged development, the consequences of crises in other countries would be reduced.
He explained how Germany had not helped the eurozone by flooding the markets with excessive exports. The International Monetary Fund had already said that Germany could help stabilise economies by increasing domestic consumption – yet it did precisely the opposite.
De Grauwe concluded that he does not believe Portugal will be able to recover from its economic problems without restructuring its debt programme. A new austerity plan will be a sure-fire way of leading the country into bankruptcy, he predicted.
“They tell Portuguese people to keep making sacrifices. Why? To pay off debts to the rich Northern European countries? This will be explosive and the Portuguese people will not accept this indefinitely,” said de Grauwe.
