Friday, March 25, 2011

Portugal's Woes --A Lesson for the US

The European debt crisis seems to be growing like contagion, rather than abating, as European governments slash and burn budgets.  Greece was in trouble from low tax collection with lots of government services.  Britain had more complicated reasons.  Ireland would probably have been fine if they had not promised a complete bailout of her national banks.  Now we come to Portugal.  She had cut her budgets twice hoping to avoid imposed austerity, but the depressive effect on her economy from the budget cuts has only made the problem worse.  Now her government collapses. An article  at Reuters: http://blogs.reuters.com/trnewsmaker/2011/03/24/portugals-government-collapse-complicates-europes-problems/

Perhaps this is a warning to us.  Budget slashing  in an attempt to revive a depressed economy is like trying to get out of a hole by digging. while the stock market rises and there are minor improvements on the job front, our economy still totters with growing foreclosures, slow construction and manufacturing and once again rising fuel prices.  The combined effect of the European budget crisis contagion and the massive losses in public sector wages, jobs and benefits may well be enough to push us over into a second recessionary spiral soon.  

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