Wednesday 10 March 2010

The road to nowhere

   The last few days were characterized by a huge expectation about the new program for stability and growth of the Portuguese Government. The images of civil unrest in Greece, the fear of credit rating agencies and the current political situation created an interest for that program that it had not seen in past releases. Finally, we get a glimpse of it in an official document here (sorry, only Portuguese version for the moment).
   The first reading meets my (low) expectations and will leave unsatisfied all those waiting for a "silver bullet" to solve the budget deficit issue.
   There are several unsettled issues in the document, and a simple question that I am interested on was not answered: how much of the current deficit is due to "automatic stabilizers" at work on a downturn, and therefore how much of the recovery will be automatic as well? Can the PESSOA model mentioned in another post provider an answer to this?
   Without a precise knowledge (or at least as precise as we can get) about the role of economic growth in reduction of "social payments" and increase of fiscal revenues, it will be hard to judge the impact of the currently proposed measures.
   Additionally, although the economic press has made extensive reviews of some of the measures, there is no precise account on the impact of each of them in the economy, or of alternatives that have been, eventually, considered and discarded. That would be useful to know as well.
   Overall, I do not expect any civil unrest translating into street fighting, due to the calm nature of people and not to the particular measures adopted.

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