tag:blogger.com,1999:blog-3120478448417742445.post7340304955840444354..comments2024-03-24T06:35:14.281+00:00Comments on The Portuguese Economy: The path aheadEditorhttp://www.blogger.com/profile/16779405217168307855noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-3120478448417742445.post-78606693955209838462011-02-10T11:57:23.249+00:002011-02-10T11:57:23.249+00:00@ PPP Lusofonia
I tend to agree with you although...@ PPP Lusofonia<br /><br />I tend to agree with you although the restructuring of the debt is a delicate matter and should happen only if there is a large consensus by all parties (creditors, debtors, institutions). It would be probably easier is a eurobond existed: the restructuring could occur through a swap with the eurobond (with an haircut at market prices). But there is no eurobond and plain default might be very costly.<br /><br />To rebalance the current account, Portugal priorities are to 1. increase competitiveness and 2. increase domestic savings. A policy that favors savings and depress consumption will impact favorably on the trade balance and start the deleveraging of households balance sheet. To increase competitiveness the unit labor cost of producing in Portugal should decrease.Francesco Francohttps://www.blogger.com/profile/11861110874760435047noreply@blogger.comtag:blogger.com,1999:blog-3120478448417742445.post-67141109061898558692011-02-10T10:58:02.736+00:002011-02-10T10:58:02.736+00:00With the Single Currency, we've lost the early...With the Single Currency, we've lost the early warning signs provided by FX pressures, and external debt accumulates until it becomes unsustainable. Some EURO analysts even beleived that CAB deficits no longer matter, an illusion that has come back to haunt us. <br /><br />With so much focus on the internal budget deficits, little is being done do cut imports, to reduce consumer credit, to provide incentives to save through positive real interest rates, etc. <br /><br />The way out of the debt crisis will probably require (1) restructurin of the existing external debt, public and private, (2) reducing the new debt needs by rebalancing of the CAB, with sharp cuts in imports because imports take a lot longer to grow and (3) sharp increases in domestic savings, from the public and business sectors to families.PPP Lusofoniahttps://www.blogger.com/profile/13027335388583446474noreply@blogger.comtag:blogger.com,1999:blog-3120478448417742445.post-1224618971363153572011-02-09T12:25:04.525+00:002011-02-09T12:25:04.525+00:00"Et tu Brute?"
Why do you need to convi..."Et tu Brute?"<br /><br />Why do you need to convince internation investors that the Portuguese economy external position is sustainable?<br /><br />Isn't Portugal part of an integrated economy under one currency, with free capital flow?<br /><br />Concepts of external/internal debt make no sense at all in an integrated economy such has the Portuguese, its like saying California current account is unsustainable (don't know if it is) and that they will have problems atracting investment because of that, or saying the same about Alentejo...<br /><br />Debt decisions are individual and casuistic, an agreement between the lender and the borrower, usually based on the finantial and economic condition of the borrower, they have nothing to do with current account deficits (directly..)<br /><br />We borrow and pay in Euros, and there is perfect capital flow in the EU, so how is the current account deficit such a big deal, and what is the link with the government defict?<br /><br />We don't have a currency, remember....rastanplanhttps://www.blogger.com/profile/13069268139980949915noreply@blogger.com