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Will Portugal turn into a second Greece?

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  • Schrader, Klaus
  • Laaser, Claus-Friedrich

Abstract

Current economic developments in Portugal do not portend well. The Portuguese GDP is shrinking and the growth forecast for 2012 is gloomy - in the EU only the forecast for Greece is even worse (Figure 1). Moreover, Portugal is now having to pay double-digit interest rates on its bonds, its debt ratio exceeds 100 p.c. of GDP, its unemploy-ment rate is knocking on 15 p.c., and its current account deficit continues to remain high. All of these things not only indicate that Portugal is in a serious economic crisis. They also conjure up parallels to Greece's economic plunge. Thus, it is not surprising that many expect that Portugal will turn into a second Greece. But is this expectation really well founded? We think the answer to this question is no. A careful analysis of the crisis in Portugal shows that it is different from the crisis in Greece. Portugal has a better chance of avoiding economic collapse than Greece.

Suggested Citation

  • Schrader, Klaus & Laaser, Claus-Friedrich, 2012. "Will Portugal turn into a second Greece?," Kiel Policy Brief 42, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwkpb:42
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