D-Mark Geldschein

Euro gleich Teuro?

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Der Euro in Europa - Portugal



The Portuguese economy has been a classic example of boom and bust. In 1998, Portugal had the 2nd highest GDP growth rate in the Eurozone after Ireland. This was combined with relatively low inflation of 2.4 percent. In 2002 OECD figures put growth at 0.4 percent, the third lowest in the Eurozone. Inflation in 2001 averaged 4.4 percent, second highest in the Eurozone after Ireland.

Portugal traditionally has a low unemployment rate, but this has been rising since it joined the euro. The unemployment rate in Portugal has increased from 4.1 percent in 2001 to 4.7 percent in 2002, and is predicted to rise to 5.1 percent in 2003 (OECD).

Public services and spending cuts
The Portuguese Prime Minister has described Portuguese public finances as a “national catastrophe” and has said that the country is “standing in its pants”. He said that Portugal is “going through one of the most difficult moments in its history” and called for the “whole country to make a patriotic effort to save” (FT, 2 May 2002).  The European Commission has initiated an “excessive deficit procedure” against Portugal because its budget deficit is considerably higher than the 3 percent limit. This has forced Portugal into making some humiliating cuts in public spending. The defence budget has been cut by 50 percent. In March the Navy Chief of staff had to order all vessels back to port in an effort to save fuel. The army has had to take out bank loans to pay its soldiers, who have also been advised to bring their own lavatory paper to work due to cutbacks. The air force has had to cancel training flights and asked personnel to bring their own food to work. The government has also been forced to raise VAT from 17 percent to 19 percent and has postponed a proposed cut in corporate taxes designed to boost the economy. Civil service recruitment has been frozen and more than 70 state bodies have been closed or merged.

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