Formally to the EU in Ireland and the International Monetary Fund (IMF) made an application for financial assistance, the market began to worry about possible steps Greece, Portugal and Ireland has followed another into the euro zone countries to the outside world for help. Although Portugal Portugal politicians came forward to say the recent financial position frequently, without outside assistance, but analysts believe that the enormous challenges facing the Portuguese fiscal consolidation.

Portugal will need assistance is expected to

Amount of at least 50 billion euros

Data show that the first 10 months of this year, an increase of public spending, Portugal 2.8%. In addition, 23 Portugal, 10-year Treasury bond interest rates rise further, from 6.8% to 22 6.9%, close to 7% earlier this month set the historical record. Meanwhile, the debt crisis as investors worried about the spread of influence, Portugal, the major stock market index fell 2.2% 23.

Joint credit analyst in Munich that aid operations in Ireland have made just the opposite effect with the expected, that not only did not aid the Irish market fears ease, but investors exacerbated the tension, and The tension spread to the same problem with the debt of Portugal and Spain.

London-based consulting firm Capital Economics analyst that investors are looking for the next target, while Portugal just qualify. She is expected early next year, Portugal is likely to seek assistance from the outside world, because in April, Portugal will face billions of euros of government bonds to refinance, and assistance in Portugal may require at least 50 billion euros.

For assistance operations can resolve the debt crisis in Europe, the market is no confidence. Given the current economic decisions about market trends, and if this credit crisis spread to the larger euro area economies, and that Europe will pose a great threat to the entire financial system.

Assistance to be conducted to avoid the effects of

Although the market reacted strongly, but not pessimistic Portuguese politicians. Ani Barka da Silva, President of Portugal Wako has said that despite serious economic difficulties, but Portugal does not need to resort to the International Monetary Fund. Silva said Portugal’s present situation and the situation of Ireland and Greece was different, the Portuguese banking system without any crisis, there was no real estate bubble, and Portugal’s public debt in EU countries are also at an intermediate level.

Portuguese Prime Minister Jose Socrates of Portugal are also denied the need for assistance. He said the different situation of Portugal and Ireland, Portugal does not require any assistance to overcome their financial difficulties. “We do not need any assistance, the need is to do the right thing, which is approved fiscal 2011 government budget.” He also hoped that Ireland can apply for assistance the market returned to normal, to avoid the risk of spread of the transmission effect produced.

Portuguese Finance Minister Santos also recently said the Irish showed the euro zone aid have effective mechanisms to ensure financial stability, this move will ease market uncertainty, boosting investor confidence. He also insists that Portugal will be achieved this year will be the proportion of fiscal deficit to GDP target of 7.3% control, while the next year, this proportion will be further reduced to 4.6%.

Rectify the enormous fiscal challenges

High unemployment rate next year

Analysis, to solve the debt crisis of Ireland to Portugal is not very helpful. As a fundamental basis, the Portuguese economy is very fragile.

Over the past 10 years, Portugal was only 1% of average annual economic growth rate, while large-scale borrowing to maintain its traditional high welfare, high consumption life style; industrial structure and old, rely solely on export of textile and footwear products, but because of low productivity, weakness in recent years to compete in Asia and other emerging economies, while the euro single currency can not lie in Portugal to promote exports through currency devaluation; inefficient state-owned enterprises, the total size of over 15 billion euros of debt; labor market rigidities, the public sector redundancies in serious condition.

2009, Portugal’s budget deficit to GDP ratio exceeds 9.3%, following Greece, Ireland and Spain, the fourth highest after the euro zone. Government data show that the Portuguese public debt to GDP ratio of 86%, while the market is estimated that this proportion may be far more than 100%.

Therefore, the core of solving the debt problems of Portugal, not only fiscal austerity, but also for the country’s economic development mode to adjust, increase efforts to improve productivity and competitiveness, stimulate economic growth. Portuguese central bank is expected, following the 2.7% contraction in 2009, the Portuguese economy will grow 0.9% this year. But many economists expect the impact of fiscal austerity by the government, the Portuguese economy is likely to fall back into recession next year.

Portugal, 2011 budget shows that Portugal’s fiscal austerity starting from January next year, increasing taxes, cutting public salaries, freeze pensions and increase the transparency of public spending. 26 at the Portuguese Parliament is scheduled to vote on the Budget. Economists expect the unemployment rate in Portugal, more than 11% next year, reaching the highest level in recent decades, which will pressure the government to implement austerity policies.

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