20 Jul 2011

Portugal Joins Spain And Greece In Lying About Its "Colossal" Deficit

First Spain's Castilla La Mancha region was the first to announce it had "discovered" major debt ceiling holes, now it is Portugal's turn. The Telegraph informs that "Portugal's new leader Pedro Passos Coelho has told the nation to brace for further austerity measures after his government discovered a "colossal" €2bn (£1.7bn) hole in the public accounts left by the outgoing Socialists." And while it answers our immediate question "who's next" it certainly does not provide an answer to who's last. Because as more and more governments are changed, more and more such "discoveries" will be announced, but luckily for Europe (and then America), there are far more pressing issues that distract the populace than discoveries than in the past would have led to popular backlash. Concurrently, Portugal joins Greece in indicating that beggars can most certainly be choosers: "Mr Passos Coelho also appeared to caution the European authorities that his government will not tolerate heavy-handed interference in the country. "We want to take part in an ambitious European project and make our contribution so Europe can confront its problems in the most ambitious way, but as prime minister I will not stand by and let Europe govern Portugal," he told a party gathering." And while short-termism reigns across capital markets at least for a few more hours, the reality is that there is simply not enough money out there to plug each and every hole as it is uncovered. But that will take the market a few weeks to months to realize.
More on Portugal demanding equal terms (with who?) in Europe's resolution of the latest bankrupt state:
There is growing rancor in Lisbon over the term of the €78bn rescue by the EU and the International Monetary Fund, and the sweeping powers of the inspectors as they impose a "structural adjustment" on the economy.

The penal rate of interest charged by the EU is expected to top 5.5pc and risks trapping the country in debt-deflation. At the same time fiscal austerity, without offsetting monetary stimulus or devaluation, may tip the economy into an even deeper downturn.

EU officials are pushing hard for a 100 basis points reduction in rates on rescue loans, hoping to win backing from a reluctant Germany at an EU summit on Thursday.

The revelation of a budget hole in Portugal has echoes of what occurred in Greece in late 2009, when an audit by the new Pasok government exposed a budget deficit twice the level previously declared to the European Commission.
To recap: major lies about deficits in Greece, Spain and Portgual. But certainly all is well in Europe's core and, needeless to say, America. And if it isn't, there is always the printing press. So of all things to get sold off today (as predicted), we get the one asset that can not be printed.
Go figure.


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