Spain and Portugal have hurried to disassociate themselves from Ireland’s debt crisis, saying their own fiscal problems can be solved without the kind of rescue package mooted for Ireland by the European Union and the International Monetary Fund.
“The commitment to cut the deficit is one which must be fulfilled exactly as promised, because on it depends the confidence in our economy that will pave the way for economic recovery and the growth of employment,” he said.
In a clear comparison with Ireland, he said Portugal had not suffered a housing market collapse and had a banking sector that was “resilient, solid and well capitalised”.
Lisbon-based economists said the biggest test of Portugal’s borrowing capacity would come early next year, when the government needs to raise a large part of an annual borrowing requirement estimated at about €20bn.
Some are insisting on ever harsher austerity programmes. “The agenda needs to be clear and decisive, accepting that Spain needs to restore fiscal discipline aggressively,” said Raj Badiani, economist at IHS Global Insight, in a note on Spain on Thursday.
“In a world of structurally deficient demand, the governments of ‘core’ Europe are pursuing fiscal austerity with feckless abandon,” said Jamie Dannhauser of Lombard Street Research. “This means an unnecessarily painful adjustment for the periphery countries.”