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Portugal's Budget Austerity May Do More Harm Than Good

Jul 2, 2013
Originally published on July 2, 2013 8:36 am

Transcript

DAVID GREENE, HOST:

I always wondered where some of those stock market symbols came from.

To Europe now. Portugal's finance minister - the architect of the country's economic bailout deal with the European Union - has resigned. In stepping down, he cited the backlash against the policies he imposed at the urging of European lenders.

NPR's Lauren Frayer reports on this latest turn in the debate over whether severe budget austerity does more harm than good.

LAUREN FRAYER, BYLINE: Of all the bailed-out countries in Europe, Portugal has been the good student - taking the austerity medicine its lenders prescribe. Portuguese Finance Minister Vitor Gaspar took it even further - doubling budget cuts and tax hikes. Last year, he predicted the shock of austerity would actually create jobs.

VITOR GASPAR: We want to implement the agenda of structural transformation as fast as we possibly can.

FRAYER: But this was the result.

UNIDENTIFIED GROUP: (Chanting in Portuguese)

FRAYER: Last week, hundreds of thousands of workers held a general strike - including Joao Vasconcelos.

JOAO VASCONCELOS: The recipe is not working, unemployment is high. Every measure had a boomerang effect. So we're fighting for some dignity.

FRAYER: Citing such public backlash, Finance Minister Gaspar resigned on Monday.

Economist Arlindo Oliveira says Portugal's experience shows that austerity alone doesn't work.

ARLINDO OLIVEIRA: The prescription itself was wrong. The government took it too far - was too good a student. I think it was bad for Portugal and ultimately will be bad for Europe.

FRAYER: On word of Gaspar's resignation, the European Union called on Portugal to stick with austerity. But another bailout might be necessary.

For NPR News, I'm Lauren Frayer. Transcript provided by NPR, Copyright NPR.