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Finance minister: Portugal needs a bailout

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Paul Mason | 19:36 UK time, Wednesday, 6 April 2011

Portugal managed to borrow E1bn, short term, at interest rates so prohibitive that the finance minister has now announced they will seek a bailout. The prime minister is about to go on TV and admit defeat for the country's two year strategy of deficit reduction aimed at retaining financial sovereignty, which it will now effectively lose.

Though it's a humbling moment for Portugal, there is a chance this is endgame for the Euro crisis - IF - and that is a humongous if - the Eurozone and IMF can stop the cycle of austerity and low growth at the periphery here, so it does not spread to Spain.

I visited the country and spoke with ministers a month ago. Then they were determined to resist bailout - and they've gone into the snap election on a programme of avoiding it. That programme is now null, and it will place pressure on the opposition Social Democrats (confusingly named - they are centre right) to explain what their programme is (they had avoided it until now, and are likely to win the election).

For a link to my video report on the specifics of Portugal's crisis, go here. More tonight on Newsnight

Comments

  • Comment number 1.

    If I can borrow a billion on a 0% interest credit card for 12 months then I could make a killing loaning the money to Portugal at 6 or 7 percent.

    Hmm, but what if they don't pay it back?

    Perhaps they would have to sign over the Algrave just in case.

  • Comment number 2.

    I cannot imagine the Social Democrats breaking out of the austerity - deficit borrowing cost vicious circle - at least on the first attempt to negotiate a bailout.

  • Comment number 3.

    C'mon Paul

    The IMF said this recently wrt Spain

    http://www.bbc.co.uk/news/business-12983966

    A bit like the dreaded vote of confidence in a football manager.

    QED as below

    http://news.bbc.co.uk/1/hi/8485586.stm


    I had to dig deep to find the next one.

    http://www.straitstimes.com/BreakingNews/Money/Story/STIStory_580096.html


    How did the above statements turn out anyone remember?


    But ahhh yes ..spain is different.

    At the moment.

  • Comment number 4.

    I meant Algarve and not Algrave... but hey, perhaps I was right first time.

    So, when this week is the ECB supposed to be raising interest rates?

  • Comment number 5.

    I am watching newsnight with people moaning about tax rises, cuts etc. Why oh why doesn't the BBC and other media explain to the people of this Country about what happens if we go the same way as Irelan/Portugal. If you lose control of your economy your stuffed. Too many people in this Country are state junkies and need to start taking control of their own lives for a change. They expect the state to pay for so much which is in effect the taxpayer you and me. Instead if people want something then make your own provision and stop scrounging off of others. Of every £4 we spend £1 is borrowed no one runs their household like that!!

  • Comment number 6.

    does aufhebung translate into portuguese ?

    http://en.wikipedia.org/wiki/Master-slave_dialectic

  • Comment number 7.

    Re your UK report tonite

    Why did you show the English Defence League while talking about a violent political response to austerity, with reference to such action from the left and 'the right' (accompanied by visuals of the European anarchist nutters, performing in London, then the EDL)?

    Wrong on two counts:

    - keep this in mind, 'the right' is transnational capital
    - the EDL opposes fundamentalist Islam - not a great deal to do with financial austerity ???

    Find another way to 'balance off' your anarchist nutter mates

  • Comment number 8.

    It was a real cheap shot

  • Comment number 9.

    Paul
    I'm a technophobe, despite having a Ph.D., hence the frustration of not being able to send a simple message without registering, declaring that I am not a communist and that I have the ability to handle small engines. Seriously, viewing your report tonight, please come to Alderley Edge. Clarkson tells the world about the Cheshire 'tractors' and we have a local MP, George, telling local businesses they should try harder, but in effect, entrepreneurs here are really struggling. We need an objective view. MDB

  • Comment number 10.

    Someone is going to say it eventually, so it may as well be me. Thank goodness UK house prices are rising.

  • Comment number 11.

    @CaptainOgbog

    Can you please go away and look up macro- v micro- economics.

  • Comment number 12.

    CaptainOgbog:

    "Why oh why doesn't the BBC and other media explain to the people of this Country about what happens if we go the same way as Irelan/Portugal."

    It's all about priorities. Overall cuts mean BBC cuts, so the BBC would rather keep walking into long-term oblivion and protect The White City in the short-term. I'd imagine there are also loads of left-wingers who think 50% state spending of GDP is a "good thing", especially when a significant amount of that ends up in their pockets. Managing BBC3 is as important as nursing, you know.

    IMHO this is why they pushed Cleggy boy so hard just before the election. A Tory majority would have ensured BBC destruction. Pushing that fool was their last roll of the dice.

    I demand the right to work all my life taxed at 40% to pay for government final salary pension schemes that nobody my age will get. Now that is +true+ freedom! Please create a massive state apparatus so I'm coerced down this channel rather than having anything messy like having to march me at gunpoint as that would look like I'm not really free and instead a slave of the state. Thanks!

  • Comment number 13.

    Paul, watched your broadcast last night, a lot of stuff about the UK High Street woes. Really this is PR driven journalism. The UK high street is decline because the online market is really taking hold, this a paradigm shift not an indicator of Gov. policies, although cash restraints/fuel prices are making people think harder about how/where they spend - then they discover the online world and they are gone from the high street forever. Less traffic though!

  • Comment number 14.

    #13

    Interesting observation, some truth in that I am sure, but not the whole truth, i guess the figures tell the true story, the high street (in terms of market share) is more of a useful illutrative background to articles rather than being an absolute reflection. Better to show the 'high street' rather than using a dry bar chart showing reduced consumer spending overall.

    We are becomming a nation of hermits, withdrawing from reality, doing our shopping on line, drinking at home (pubs are closing everywhere) socialising on the net, watching football on telly.

    Irrespective of the economic reflection of the above that is extremely unhealthy situation on all kinds of levels.

  • Comment number 15.

    #13

    Agree with you about hermitisation, but online shopping has opened up new businesses up and down the country which were previously stymied by the oppressive retailer power, this is good - have no doubt about it.

    As for Pubs closings many, many, reasons but the smoking ban and drink drive regulations are prime reasons, were these bad laws?

  • Comment number 16.

    #12 Ben

    Careful who you vilify. Not sure if you saw my post yesterday:

    http://www.bbc.co.uk/blogs/newsnight/paulmason/2011/04/portugal_86_real_interest_rate.html?postId=107878506

    #13 Blueixus

    The Internet may only explain a small part of the decline. One big factor in hammering the high street is the concentration of consumer spending in large retail parks. A visit to my home town at the weekend showed how bleak the high street was with nearly 20% of units empty - whereas the nearby retail park was fairly clogged.

    But the real issue is still an overall declining consumer confidence. The decline is real:

    http://www.nationwide.co.uk/NR/rdonlyres/9B667EED-59F0-4760-932B-B3B5F2577E54/0/NCCI_February_2011.pdf

    "Growing pessimism towards spending forced the Spending Index down to 52 points in February – its lowest level since the survey began"

  • Comment number 17.

    BATTERY CHICKENS CAN'T COPE WITH SOCIETY (#14)

    Well observed Jericoa. Perhaps there is now 'no such thing as the socially competent individual'?

    Might the ubiquitous institutionalising of school (preceded by the psychologically weakening sitter-minder-crèche experience) be the underlying, unacknowledged, uninspected cause?

    The education fanatics, keeps trying to 'help' kids who don't match with the schooling ethos. But if the motorway is full of holes, you don't try to modify the smaller cars.

    Time to admit: 'IT'S THE SCHOOLING ITSELF - STUPID'.

  • Comment number 18.

    #17 School for Scoundrels (great film by the way)

    Yes indeed, for myself I was a bright kid who went to an awful school and therefore slipped under the radar of the system.

    Had that not been the case, heavan forbid, I might have turned out to be Dave, Nick or Ed... I count myself fortunate, as it turned out I actaully got a real education out of it all. How lucky is that !!!




  • Comment number 19.

    Someone's in a Mood(y) this morning about the upcoming ICB interim report:

    http://www.moneymarketing.co.uk/investments/moodys-warns-of-uk-bank-downgrade/1029243.article

    "UK banks could suffer downgrades or reviews to their credit ratings because authorities are no longer as willing to bail them out, ratings agency Moody's says."

    Subtext being: "We'll take down your banks, if you don't underwrite them with state support."

    I thought racketeering was outlawed?

  • Comment number 20.

    Hi - thanks for the pointer from the other forum - thought you had got bored. I am surprised to be told not to create division from someone who posted "You just need to recognise which side of the fence you are on.". I guess if I agree with you then it's cool to divide, but if I have another interpretation then I'm lumped in with racists.

    These are issues of right and wrong. The boomer washy attitude is toxic. It allows all this stuff to happen under our noses whilst we trot out meaningless rubbish about "understanding both sides of the story". A lot of what's happening to young people in this country, like as you say debt normalisation through student loans, is abhorrent. Especially as the lie is that most don't need to go and do a poor course for a fortune. All in order to avoid entering a hollowed out economy, neglected because the current generation fancied selling houses to each other for 15 years instead of working hard.

    I do agree with a lot of your posts but I don't agree that this is some big banking conspiracy alone. The other half of the problem is the current generation all voting for things that benefit them which they cannot afford and which they are putting "on the tab" for the next generation to pick up. I don't think young people are confused - I think they are catching on to the fact that the deal they are being offered is dire. Bankers did not create student loans. People in this country voted for them as part of a silly idea that 50% of people should go to uni, which is in itself utterly stupid. Should the current "grown ups" not take some responsibility for this mess?

    And by responsibility I don't mean admissions of regret or rhetoric - I mean a haircut. Grade 2. Bailing out the banks only protected the generation that presided over this mess.

  • Comment number 21.

    I must go to Yeovil....never let them know you NEED the money.....

  • Comment number 22.

    Ben

    The fence I was referring to is the main class divide / warfare exemplified by the Warren Buffet quote. 99% of the UK, no matter what age, race, gender, public / private sector is actually all on the same side. The side of the fence that is getting shafted by moneyed elites - not just bankers (many are just the gullible lieutenants carrying the water) but the uber-rentier class.

    These are the people who have vast amounts of wealth and can use this to acquire even greater amounts, primarily through large scale rentier activities.

    Laying the charge at people who took out a mortgage to buy their own home is to accuse almost everyone and yet no-one. Surely it is those who actively promoted multiple home ownership, large scale developers, buy-to-let mortgages and a whole host of parasitic rentier activities that were to blame.

    We were all actively sold a vision of growth and prosperity by the very people who knew full well that the world could not prosper continuously in absolute terms. See my post:
    http://golemxiv-credo.blogspot.com/2011/02/guest-post-by-hawkeye-sell-freedom-buy.html
    Yes, the public is gullible and naive, but they certaintly aren't culpable. I don't condone their ignorance, but they are just pawns in a far greater scam. Remember, a pawn's role is mainly to deflect attention, take out other pawns and ultimately get sacrificed.

    You & I are on the same side, Ben. We are just the pawns.

  • Comment number 23.

    so just how feerless is this Orwell nominated blog then ?

    http://www.youtube.com/watch?v=GPfI9oxZuEo

  • Comment number 24.

    good debate with Polly etc., but the Toryboy just came out with the same old mantra abt 'it's all Labour's fault' and they spent recklessly failing to also say that they fully supported Gordon's gifts to the City and infact, they would have gone further also he tried to talk over Polly saying that if Brown did not support the bailouts to the banks the cash machines would have stopped working that after noon but not a peep abt that one, these coalition guys really should try a different approach, just slagging off Labour will not do also it is also WRONG....and Toryboy looked very shifty....

  • Comment number 25.

    I do not like Polly Toynbee but I have to admit that she said something sensible on NN last night - in that most people still do not realise how bad things are and that it will probably not hit most until the end of month when their wages are paid or the benefits they get are less.

    Back to the crisis in hand - Spain going bust is inevitable. They will deny it, are denying it and this no doubt will be a slow drawn out process over the Summer months... but Spain will go bust sooner or later.

    Probably sooner.

    What the Spanish Government need is a British MP to do their expenses and books.

  • Comment number 26.

    Speaking of which, can someone point me to a good succinct article on what happens if Spain is indeed next, (We all know it will be), and that it transpires there is not enough cash - either because countries cannot afford to help or because they are unwilling to help - to bail Spain out?

    What happens then?

    Presumably, because of just how much in hock German and UK banks are to the Spanish, who are in hock to them (Work that one out), there would be no choice in either Germany or the UK to do something?

    But what will that mean for us?

    I imagine, at the very least, it might put some extra phone numbers into Paul's contact list?


  • Comment number 27.

  • Comment number 28.

    "You & I are on the same side, Ben. We are just the pawns."

    Only some of those pawns have a house that they could not afford if they were young today (because the young will have to pay for the mess we are in). Some pawns are more equal than others.

  • Comment number 29.

    tawse

    You never know. Maybe the US will topple before Spain does. The joker in the pack is the unfolding Middle East uprisings. The USD is getting hammered today, and I wonder if the US takes too many punches whether it can pull itself back off the ropes:

    "With the Saudis acknowledging security shortcomings, one must bring into focus the Petro-Dollar Standard, the defacto accord between the US and Saudi Arabia. They sell OPEC crude oil in US$ denomination only, and the USMilitary provides security protection for the royals in power as they accumulate great wealth. The accord is slowly disintegrating, with enormous potential impact to the USDollar standing. It seems military underpinning for the USDollar is slowly fading away like an old soldier after several decades."

    http://news.goldseek.com/GoldenJackass/1302120000.php

  • Comment number 30.

    #27 "Wall Street fiddles whilst the US burns"

    Max Keiser, and his side-kick Stacy, are doing a far better job of covering the economic crisis than the massive resources that the BBC bewilderingly shovels down our throats:

    "let me add that complete disregard for the rule of law is at the heart of the issue as to why the U.S. dollar is selling off. There are simply no rules against counterfeiting, insider trading, and market manipulation at every level of the banking system including the Fed and the Treasury . . . So why would anyone want to own the instrument of this deceit?"

    http://maxkeiser.com/2011/04/08/as-i-predicted-after-goldman-sachs-broke-the-law-they-lobbied-the-sec-to-change-the-law/

  • Comment number 31.

    Ben

    Well, I suspect that not many people own their houses outright. They probably have frightening levels of debt taken on because they assume a benign future.

    If you are young, and without much debt then you might be better placed to cope with our uncertain future than you imagine:

    ----------

    Ode to the nemesis of Mammon

    No assets, no debts, the cry of the free
    I only covet the company of friends that I see
    My food is the bounty that falls from the tree
    For there's nothing I own to be taken from me

    -------------

    There is a bigger story to our present situation, and I spell it out in more detail here:

    http://forensicstatistician.wordpress.com/2011/04/08/the-story-behind-sell-freedom-buy-control/

 

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