If the eurozone debt crisis worsens, the Portagollo it would be among the first countries to be affected. And indeed he cares. In the Financial Stability Report, published this morning by the Bank of Portugal, we read that the country has to deal with a "Very heightened risk of contagion from adverse international developments". It is the future of Greece, whether or not it will remain in the eurozone, and that of Spain, and its economy still in recession, that most concern the central institution. “The possible worsening of the eurozone sovereign debt crisis and a worse-than-expected economic performance of the main economic partners” could cause serious damage to the Portuguese economy.
On the domestic front, however, the Bank of Portugal fears austerity. The institute has expressed its doubts about “the ability to effectively apply the necessary measures to comply with the programme” – the 78 billion euro bailout negotiated with the EU and the IMF. Even if the bailout avoided a "violent and disorderly" adjustment, according to the Central Bank it will continue to lead to "a slowdown in economic activity in 2012, with the consequence of a rise in unemployment and the number of bankrupt or insolvent companies".
And the macroeconomic data confirm a precarious situation. This year, GDP is expected to fall by 3% and unemployment has reached a record level of almost 15%.
