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Guest Post: Portugal - Fiddler Paid, Music Stops
Submitted by Alexander Gloy of Lighthouse Capital Management
Portugal: Fiddler Paid, Music Stops
While Greece is pretty forthcoming with its apocalyptic fiscal data, the same cannot be said of Portugal.
When it comes to inquiring about monthly fiscal deficits you bite on granite. Banco de Portugal has limited quarterly figures. The “Instituto Nacional de Estatistica” has conducted a study about population growth in Angola. It supplies data series on important topics as the “self-sufficiency ratio of wine”, the “movement of passengers on inland waterways”, and, not to be missed, the “crude divorce rate”.
Impossible to find a simple table about the general government fiscal deficit, preferably by month. Maybe I was looking for something that does not exist. Maybe I am too impatient; after all, the numbers for 2009 and 2010 seem to be only “half-finalized”:
Souce: EDP (Excessive Debt Procedure) tables, Eurostat, October 2011
Let’s work with what we have: quarterly GDP numbers and the governments forecast of -2.2% GDP growth in 2011 as well as -1.8% in 2012:
Now on towards the fiscal deficit. 2010 numbers got bumped up a bit from the “Madeira”-effect (discovery of formerly undisclosed debt, a.k.a. the “Greek” maneuver). The deficit is supposed to decline from roughly EUR 17bn (2009 and 2010) to 10bn (2011e) and 7bn (2012e).
In May, shortly before receiving a EUR 78bn bailout, the Portuguese government trumpeted encouraging snippets regarding the state of the economy. “Fiscal revenues up 16.8% y/y in April” (May 20th). “January-through-April central government deficit EUR 1.55bn, 2.28bn less than a year ago” (5/20). The new government announced “to set an example of cutting spending in administration” and intended “to surprise, go beyond bailout terms” (Coelho 6/6).
The good news continued: “Central government deficit for the first five months of 2011 cut to 1.03bn”; “State spending fell 7.2%, revenues rose 6.9% in the period January through May” (June 20th).
With all those feel-good reports it was only fair for the EU’s Troika report on Portugal to be “very positive” (Baroso, June 23rd). The EFSF disbursed its funds to Portugal on June 29th.
However, as anybody who has ever visited a Hungarian coffee house can confirm, as soon as you pay the fiddler, the music stops.
After six months, “there was a shortfall of 1.1% of GDP in budget” (Finance Minister, August 12th). Wait a minute. According to the INE (Instituto Nacional de Estatistica) the budget deficit for H1 2011 amounted to 8.4% of GDP or roughly EUR 6.7bn. So we went from 1bn at the end of May to 6.7bn mere four weeks later?
Of course, the new government found a “colossal” EUR 2bn hole in the public accounts “left by the outgoing Socialists” (Telegraph, July 18th). From then on, it was only downhill. “The country’s situation is grave” warned the Finance Minister (September 6th). He added “We are facing a serious financial crisis” (September 14th).
With factory orders declining by 16.8% in August and ECB financing for Portuguese banks rising to EUR 46bn (from 39bn in March) there is really not much to cheer about. How realistic are the governments projections then? How is it possible for debt-to-GDP to peak at 106.8% in 2013 (government, August 31st) when, taking the governments own numbers, one arrives at 115% by 2012?
In view of a rapidly deteriorating situation, is it really necessary to produce (government on 8/31st) wildly unrealistic forecasts such as budget deficits of 1.8% (2014) and 0.5% (2015)?
To evaluate past forecasting skills one look at the “SGP” (Stability- and Growth Programme) should suffice:
A case could be made for countries with excess savings to support those who enable those savings via trade deficits. However, a certain accountability and realistic assessment of the situation would be desirable. The “very positive” Troika report seems to have been co-authored by copious amounts of Madeira wine.
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Where the fuck are the bears in this market? Getting tired of getting hammered by these BS bulls.
They're with him:
http://youtu.be/6uVtx5k0sv0
Ahhh Portugal, aka the paper Empire.
Nothing scientific but I suspect a portion of my DNA sequence came down to me from one of those lazy bastards.
We aren't lazy, just numbed and made weak by decades of socialism... Pretty much like the rest of the western world.
Its been around 500 years now since the Portuguese golden age, about time we get back in shape.
you cannot get data on Portugal because they actually don't know.
you get data on Greece bc it's made up.
They know more than you and me, and all the Sicil in It put together, that is why there is no data. You are innocent! My people are too friendly to ask for accountability and compliance from the gang of the catacomb troglodytes!
+1. The soul of wit is brevity, and accuracy adds to it.
Yet another example of why Alexander Gloy is one of the most remarkable and excellent financial commentators, period.
This latest observation only further demonstrates that it truly and really is all a game of kick the can for as long as possible.
Excellent work, AG.
You are as pathetic as Alexander. So full of yourselves...
Relax. The global economy is saved. Geithner has tapped the one man who can turn it around.
http://www.theonion.com/articles/federal-government-to-reduce-madoffs-se...
Rounding error?
Too funny; need new keyboard.
...forgot to carry the second column with nearly 6 billion in it obviously. lol
Ponzis collapse when the cash flows cant keep up.
Germany has quite a bit more to give.
The irony is they are the ones who dont want the ECB to print.
Tell the Germans savers to buy gold and get the ECB to print, the deficit spenders can go spend their worthless Euros as much as they want then.
Ding, ding, ding!!! we have a winner. This. Exactly. Print away, ECB. Germans will quietly buy gold and quietly make ready the Neu-DMark.
It's amazing how slow and labored the "rapidly deteriorating situation" feels.
Slowest motion train wreck ever.
And everyone and their inbred cousin on top of the pile screaming "Steer the train!!!"
Is it even possible to steer a train?
We've all been watching it for four years now...it's like watching paint dry.
I used to buy a huge amount of vintage Port, but I stopped about 10 years ago. Looks like that really hurt them.
If I were a rich man (Nippon): http://www.youtube.com/watch?v=XRmGtALYW5Y
"As long as the world clings to fractional reserve banking, fiat currency and compound interest it will operate in an infinite growth paradigm which is no longer possible" - MCR
Portugal, like all countries, are lying their ass off.
For example, the US debt, since the beginning of fiscal year on October 1, has grown by 146 billion. In 17 days. Annualized, that's a $3.14 trillion deficit. That's $8.6 billion a day in new debt. That's $27.75 in new debt for every man, woman and child in the US every day.
And the US CDS are still ``normal``... and the bond auction system is set up so it doesn't fail.
Who's the biggest liar in the room... portugal or the US?
Well if they are going to give out 2 trillion....you want to get as much of that as you can...so the worse you look...the more you get......Government 101...or should it be Government Debt -101
Everyone is looking for that 'Vee-shaped recovery' that is about to start any minute now ...
...
Hey! Maybe tomorrow!
---
Just as soon as oil prices go down to $34 a barrel and we can see some 'Green Shoots'.
Shame on all these #%$%#$$**% !!!!
Its apparent that Charlie Sheen's school of economics applies here as well as any in this situation.... You pay prostitutes, and Hungarian fiddlers to leave, not to show up..... The shake down is in full effect, fiscal discipline and austerity? You must be kidding.
Confidence is the glue that holds the financial system together.
Repeated lies which are short term expedients will cause lasting damage.
At this point even if italian debt is sustainable no one will believe any assurances coming out of the EU.
THE EU BLAMES SPECULATORS BUT IT IS LIES AND DISTORTIONS FROM THE EU WHICH MAY COLLAPSE THIS SUCKER.
Not so -- people will keep believing because "they need to have hope". It's just like American elections. We're lied to every election. Do we (the editorial we, not me) give up believing in the next "savior"? Nope!
To not believe, requires one to write off all his investment in the system and that's not a pretty thought.
news flash - people lie and make things up when they're cornered. They get DE-FENCE-ive.
Maybe we should all look in our OWN dark corners. IN ME.....ENEMY.
"As anybody who has ever visited a Hungarian coffee house can confirm" - bring your own toilet paper!
Just because the author doesn't know portuguese, and that the Banco de Portugal and INE websites could be better designed and translated into English doesn't mean that there isn't data.
I would recomend you look Governo de Portugal portal, where you can find all the data that you seek and the newly proposed 2012 budget.
http://www.portugal.gov.pt/pt/GC19/Governo/OE2012/Pages/OE2012.aspx
I can't recall when was the last time that a budget was submitted with so many months ahead of time. The current government acknowledges the current situation as tough and with the new budget will propose cuts (for atleast 2 years) in civil servant wages and pensions, raise VAT taxes on what are not essencial items, cut back in public investment (as the high speed rail system that the prior government insisted on, and the new Lisbon airport, etc) and has allowed the private sector to increase working hours in 30 mins per day. Structural reforms are being made in regards to the labor market, as in making it more similar with core european laws as the current ones are to stiff.
So far this government has had 2 severe setbacks this year. A budget hole that the former socialist government created in the first 6 months of the year (in just that period the budget was already around 8.8%, when the target was set at 5.9%), and a hole created by the autonomous region Madeira. The current government reacted a couple of months ago and imposed cut in wages for this Christmas (in Portugal people earn 14 wages a year; i.e. an additional one for summer and winter vacations) and raised taxes to try to reign in the deficit in 2011. Let's hope that it comes in at 5.9% or as close as possible, that would be much needed gain in credibility to show that Portugal is trying to keep its act together and isn't as such a hopeless and basket case as Greece.
Alexander
Whenever you need to search for data about Portugal, feel free to reach me. The only problem is that most if not all is in Portuguese. You'll find it much less disturbing than the one you can find about some States in the US... And if you do find it in those states, ask yourself if its really... really true.
Regards
This guy, an expert, writes a post were the FIGURE, the 2012 GDP projection is wrong and he feels free to call us liar's!!!!
Look, I voted with the feeling that a conservative government would go further than the troika agreement... I was right and now my wallet is lighter, because they did go further.
So, in the end, math is beautiful, we do the calculations and we say that it will not work. That's fine for us.
But when you accuse someone of being a liar, you should know that person.
By the way, what about the hedonic deflator embedded in the USA GDP calculation? What do you call that?
This guy, an expert, writes a post were the FIGURE, the 2012 GDP projection is wrong and he feels free to call us liar's!!!!
Look, I voted with the feeling that a conservative government would go further than the troika agreement... I was right and now my wallet is lighter, because they did go further.
So, in the end, math is beautiful, we do the calculations and we say that it will not work. That's fine for us.
But when you accuse someone of being a liar, you should know that person.
By the way, what about the hedonic deflator embedded in the USA GDP calculation? What do you call that?