Portugal imposes further austerity measures while Britain walks away

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Demonstrators hold Portuguese flags outside the parliament in Lisbon at the end of a protest march against unemployment organised by workers’ unions. Unemployment figures in Portugal have soared since the introduction of austerity measures to fight the country’s debt crisis. Photo – Armando Franca/AP

As the European crisis goes on further, it seems things will get worse before they get any better. Analysts now say that there is a more than 50% chance that EU will dissolve and that the euro will cease to exist as a currency based on how things stand right now. Ironically, it comes in a year when the EU has been awarded the Nobel Peace Prize. Their argument gains traction seeing the two most important developments that have taken place since then. The first one is that Britain has finally been excluded from the decision making process and Germany has allowed it to walk away without any repercussions.

The move comes on the back of Britain’s reluctance to pick up the tab for the rest of Europe. The rhetoric in the domestic setting is that Cameron’s stance inside his own party circles is welcomed. This shows that they want to focus on their own domestic policy first rather than thinking of the contagion spreading in the rest of Europe. It does seem to defy logic as Europe’s economic health will impact the UK as well; However, it seems that London wants to save itself from the flames before the whole house burns down. The move from Germany to allow them to walk away also has some legitimate reasoning. Ever since the crisis came into the forefront, Britain has done all that it can to slow the process of rebuilding and contribute to the fund and aid of the distressed countries.

Angela Merkel, the German chancellor, now feels that with Britain out of the way, more substantial processes can be put into place which will allow the EU to look after itself in a better manner with fewer obstructions. There seems to be too large a rift between the rest of Europe and England now and the alienation has led to the UK finally stepping out of the way. The analogy of a tunnel has been given where the participants still do not know whether it there is a light at the end of the tunnel or a speeding train headed in their direction.

At this point, however, London does not want to be a part of it anymore. Critics insist it is the last nail in the coffin and that the inevitable demise of the EU has been brought a step closer. Proponents favour it by saying that now finally a more effective framework can be put in place. The results are still to be seen in upcoming days and months.

The second event that has taken place is the implementation of austerity measures by Portugal. After Greece and Spain, Portugal has also put in place austerity measures to hike up tax and limit benefits and pay-outs to its people. When the crisis hit, Portugal was amongst the countries that was suffering from sovereign debt crisis like Greece, Spain, Italy and Ireland. Amongst the likely candidates, Portugal seems to have fared worse by putting these measures in place now whilst protests have been going on. The massive scale protests have continued over the weekend and things are expected to stay volatile for the upcoming weeks.

The country has been granted one round of EU-IMF bailout of $100 billion and it has to cut down further if it needs another bailout in the coming period. This is one step towards deficit limitation and to bring down its figures for the coming year while the country’s policies go unnoticed by the rest of the EU. Both these developments can be seen with a pessimistic or optimistic view. Pessimists will say that after Britain leaving and Portugal cutting down on its benefits, things look bleaker than ever before and it is just another step towards a total meltdown. Optimists would insist now that the EU would be more focused and united under a flag and that Portugal’s efforts will reap benefits taking it out of the debt contagion all together.

The reality is that it is much more of a trial and error method rather than an exact science and that the crisis should be seen from a more global perspective and given time. The truth still holds that these events are worsening the confidence and credibility in the markets and based on the recovery that is expected, these events are adding more doubts into the minds of the investors that they can do without…

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