Lessons Learned from Portugal

Lessons Learned from Portugal

Introduction

The economy of Portugal is still in great crises even after many attempts to take the economy on the safer side by the government. From the beginning, the nature and functions of the economy of the Portugal is mixed in high income countries. The crises that the economy of Portugal is facing currently are the results of the world recession that occurred in the year 2007-2008. The crises in the Portugal's economy also affected the European states of south and Ireland.

Discussion

The crises and severity

The current crises of the economy of Portugal include two major points. Firstly, the country will need to reduce the public spending up to 47 billion Euros which seems to, be a wrong step because this will affect the whole economic structure and not only this but also the country will need to go under severe structural adjustments. Secondly, the amount of 47 billion Euros is almost around 2.8% of the country's GDP. Such a big amount to reduce will not be an easy task for the economists. This problem will in turn lead to the contraction of about 5.5% in the country's GDP. The other problem is that the country will face a huge explosion of unemployment which is already on its peak in Portugal. In short only the cut off in the public spending will lead the country to face several different crises, and if the government of Portugal will avoid the cut offs then the country will surely need an international bailout (Forelle.C, 2011).

Causes of Crises and Hardships to Tackle Crises

The crises in the Portugal's economy are not new, and they did not even aroused suddenly. From more than four decades, the republican governments of Portugal kept on encouraging investment bubbles and over expenditures with the help of public private partnerships. Another issue was the funding of the several advisory and consultation firms plus other committees. All these funding were quite ineffective. This led to inflation in the top management, disturbance in the public work managed by the state. Moreover, the creation of the public debts and the establishment of risky credit were also poorly managed. Later, in the year 2005 the government cabinet was not able to anticipate the collapse of public finance and banking system. All these reasons erupted to contribute in the severity of the crises and in 2011 the country declared bankrupt. The problems are ...