Portugal Rejects Budget: Government Collapses, Prime Minister Resigns. Europe Gasps Simultaneously..

Portuguese Premier Resigns After Austerity Is Rejected. 

Portuguese Prime Minister Jose Socrates submitted his resignation Wednesday after parliament rejected his minority Socialist government's latest austerity measures.

The rejection "had taken away from the government all conditions to govern," Socrates said in a televised statement. He said his government would remain in power in a caretaker capacity.

The parliament's rejection of austerity measures—as well as Socrates' resignation—comes just a day before a European summit.

Socrates has said rejection of the austerity plan would force the debt-laden country to follow Greece and Ireland and seek an international bailout, which he opposes.

Brendan Keenan: Kenny will have to pull new plan out of bag as chaos descends  From The Independent.ie..

ENDA Kenny packed his bags for one EU summit in Brussels, but it looks as though he will be attending a very different one.


As the old political saying has it, events have taken over. The plans of EU leaders have been thrown into disarray by even more bad news from Ireland's banks; the imminent collapse of Portugal's government; and stern resistance to bigger bailouts from those flinty Finns.

Mr Kenny's stated purpose at the meeting -- to secure a reduction in the interest rate on the €80bn EU/IMF rescue fund -- now looks irrelevant. Instead, according to reports in Brussels, there may be a special summit as early as next week just to deal with Ireland's difficulties.

The reason seems to be that new estimates for losses at the Irish banks are going to be worse than even the €35bn allowed for in the EU-IMF loan package could cover. These "stress test" figures are not due until next week, but it may be that they will render the original plan unworkable.

EU leaders to delay eurozone rescue deal  From Euractiv.com.  Excerpts:

A government collapse in Portugal and political tensions in other member states means EU leaders are set to postpone until June a decision to reform the euro zone and boost the bloc's bailout facility as they meet for a crucial economic summit in Brussels today and tomorrow (24-25 March).

Today's summit has long been sold as a deadline for leaders to sign off on a swathe of economic reforms including boosting guarantees for its temporary bailout fund, the European Financial Stability Facility (EFSF), which has already been used for Greece and Ireland.

It was also branded as the summit that will finalise a permanent rescue fund after 2013 - the European Stability Mechanism.

But in light of recent political developments in Portugal, Finland and Germany, both of these goals have been put in jeopardy, EU diplomats say.
And:
Adding to the euro zone's woes, Germany put the brakes on a deal for the ESM on Wednesday as it revealed it could not foot payments it had committed to make in 2013. And Finland said it would resist raising the EFSF's ceiling before elections scheduled on 17 April.

"Those providing the guarantees cannot, and those who may soon need a bailout may not be able to request one," an EU diplomat said yesterday, alluding to Finnish resistance to the EFSF and a political meltdown in Portugal preventing it from requesting a bailout.

There will be many more headlines regarding Europe's economy--soon.

Let's Talk About EU, Man..

Irish bailout 'stuns' experts The €35bn (£29.8bn) going into Ireland's banks shocked experts, who feared bailout might or might not help Ireland, but in any case might not contain contagion elsewhere in the eurozone.

Brian Lucey, associate professor of finance at Trinity College Dublin was "stunned" at the cash poured in: "We've already put at least €32bn into them, so that's going to be €67bn, which is 50% of GNP, that's a world record". He also warned that a new government next year could rip up the deal. "Sovereign governments have a right to effectively do whatever they want," he said.

Portugal's still feeling the heat.. Portugal's high debt burden remained a concern for the eurozone and financial markets on Monday, a day after European Union countries endorsed a plan to help Ireland with its ailing finances.

Officials in the 16 nations using the euro currency had hoped Sunday's agreement to give euro67.5 billion ($89.4 billion) in loans to Dublin would check the spread of investor jitters to other fiscally vulnerable members of the bloc, especially Portugal and Spain.

Portugal is regarded as the next weakest link after Ireland because of its high debt load and weak growth. It has been a target for market concern since Greece's bailout in May.

Trouble in Portugal also could affect neighboring Spain, where low growth and high unemployment are shackling the economy.
And:
Roubini, a professor of economics at New York University who had predicted the financial crisis, told daily paper Diario Economico it is "increasingly likely" Portugal will require international assistance.

He was quoted as saying there are ample funds to shore up Portugal, one of the eurozone's smaller countries which contributes less than 2 percent to the 16-nation bloc's gross domestic product. Roubini said Portugal is approaching "a critical point."

But, he said, Spain, Europe's fourth-largest economy, is "too big to bail out."

Meanwhile, in Greece: You know things are bad when governments can't buy arms from other governments..

Spain continues to reel: Irish backlash hits Spain, EU warns of blow to growth Contains the sentence: He commented: "Are we witnessing the early stages of a breakdown of the euro and indeed, possibly the European Union as well?"

Wiki Leaks and Korea are more sensational, but this story is no less important. The possibility of a debt implosion contagion spreading to multiple countries thereby jeopardizing the whole European Union is, at this moment, very real. We are still in unknown territory, and none of the related news is optimistic.

And, lest we forget.. Let the protests begin!

Opposition Claims Government Understated Debt And Deficit Figures By About 25%

This time; It's Portugal. And Payback. And Twice The VanDamage..(Thanks, Janeane Garafalo)

Portugal, it seems, has a different set of problems than Ireland. Here's how: (from the Payback link..)

Ireland’s government has money, but its banks are drowning in debt, and the government has vowed to guarantee debts, making the state itself vulnerable. Portugal’s problem is different. Its banks are not especially troubled, but the state itself has high debts and low growth, and the mound of both public and private debt is considerable. The total debt is larger than the annual gross domestic product, some $275 billion of debt in an economy of $232 billion a year, one of the highest ratios in the developed world.
And:
So the interest rates Portugal would have to pay on the markets, should it have to borrow money now, would be much too high, forcing it to seek money from the European Union and the International Monetary Fund. The government here, as in Dublin, hopes the markets will calm down. But other European Union governments are concerned that unless the markets are appeased now, by protecting Ireland and Portugal, the contagion will spread to huge Spain, the fourth largest economy among the countries that use the euro.

The more I learn about this crisis, the more I tend to believe the worst possible outcomes will actually occur. There aren't any general answers applicable to more than one country, as economic circumstances will be country wide, but not regional. Solutions that appeal to both France and Germany would financially cripple or kill other EU countries. The solutions will be complex and incredibly painful for the weakest countries, and protests and riots are almost sure to follow. And still, the system will most likely collapse.

To drive the point home.. So, if the EU fractures, what sort of effect will it have here in America? Our financial structures And our government are both perilously close to collapse, and locked in tight with all of Europe. How could we possibly absorb the implosion of so many economically interwoven allies? How?