Related articles, background features and opinions about this topic.
By Christoph Pauly
Nothing is sacred to Pedro Passos Coelho, not even Carnival. Portugal's prime minister expects government employees at their desks and working on Entrudo, the traditional high point of the country's Carnival celebrations, which falls on this Tuesday.
This is "not the time to talk about tradition," the conservative head of state has commanded those of his citizens who see the move as an attack on their culture. Rather, he says, they should stop "whining" about austerity measures. It's time, the prime minister adds, to break free of old structures and to change "lazy and sometimes self-involved patterns of behavior."
Fans of Carnival celebrations are not the only ones affected -- churchgoers and nationalists will have to make bitter sacrifices as well. In response to this national state of emergency, the Portuguese government plans to do away with four public holidays. Corpus Christi and Assumption are to be crossed off the calendar without a replacement, and public holidays celebrating Portugal's first republic and the 1640 end to its union with Spain can no longer be commemorated, as is customary, with family celebrations and an extended siesta.
Fears of Default
This readiness to make sacrifices comes as welcome news to the so-called troika, made up of the European Commission, the International Monetary Fund (IMF) and the European Central Bank (ECB), whose officials are currently in Lisbon to evaluate the country's reform program. The troika hadn't even asked for such drastic measures, and their austerity watchdogs' findings are sure to be positive. In recent months, the Portuguese government has also implemented brutal tax hikes and cut pensions and unemployment benefits.
All this makes Portugal a poster child for austerity measures in the eyes of Brussels and Berlin. German Finance Minister Wolfgang Schäuble went so far last week as to promise his Portuguese counterpart Vítor Gaspar additional aid, even though the international community has already provided the country with €78 billion ($101 billion) worth of support. "If there would be a necessity for an adjustment of the Portugal (program), we would be ready to do that," Schäuble told Gaspar, who dutifully expressed his thanks. The exchange, caught by a camera crew, quickly became a popular video clip on YouTube.
But does Portugal really have a better chance of avoiding bankruptcy than Greece does? Or is the country simply the next domino destined to fall in the course of the euro crisis?
Financial markets take a far more critical view of Portugal than does the troika. They are assuming there is a 71 percent probability that the country will default within the next five years, as reflected in insurance premiums on Portuguese government bonds -- so-called credit default swaps -- in early February. Deutsche Bank writes that market participants expect that "leading European politicians' assurances notwithstanding, the private sector will become involved in the case of Lisbon as well, or a debt default may even occur."
Collapsing Demand
The €78 billion in aid is enough to last until September 2013, since Portugal has also managed, thanks to the European bailout, to place some short-term bonds on the market. Still, the moment of truth won't be long in coming. "Emergency plans, in case Portugal is not able to return to the capital market, need to be specified soon and in a credible fashion," major Swiss bank Credit Suisse says.
For now, Portugal finds itself in a deep recession. As a result of the government's drastic austerity measures, most people have considerably less money at their disposal than they had before. With domestic demand collapsing, unemployment has risen to record levels. Last year, 30 percent fewer cars were sold in Portugal.
At least 200,000 people marched through the streets of Lisbon on Feb. 11, starting in three different areas of the city and converging on the centrally located Praça do Comércio on the Tagus River. "No to inequality, no to impoverishment," they shouted.
Just as in demonstrations that have taken place in Greece, German Chancellor Angela Merkel was a favorite subject of their signs. One showed the chancellor as a dominatrix, forcing a naked Prime Minister Coelho to his knees.
Competitive on the Global Market
Rogério Hortelão is one person who hasn't lost his optimism despite all the problems. "We're good at improvising," says the president of auto parts supplier Incompol. Hortelão, a former mechanic with the Portuguese Air Force, started his business 25 years ago with a lathe and three men. Now, 350 employees at his factory in Samora Correia use heavy equipment to stamp out metal components for BMW and other customers. In 2009, the last time that demand within the automotive industry collapsed, Hortelão took the same approach to fighting the crisis as many mid-sized German companies did. He didn't fire a single employee, but instead gave them further training. It enabled him to fulfill a personal dream. Incompol now uses high-tech equipment to weld together individual components for aircraft manufacturers such as Embraer in Brazil and Pilatus in Switzerland.
Most of Hortelão's products go to buyers in other countries, and even his domestic customers are subsidiaries of international corporations. This allows the company to remain independent of the government's austerity programs.
Unlike Greece, Portugal certainly has competitive companies capable of succeeding on the global market. Europe's largest and most modern paper factory, for example, is located near the Portuguese port city of Setúbal.
Portugal has gradually overtaken Scandinavia when it comes to producing high quality copy paper. "Each year we sell each person in Germany at least 500 sheets of paper for photocopying," Hermano Mendonça, marketing director for Portucel, says in fluent English. Portucel, a publicly traded company that is majority owned by a single Portuguese family, exported nearly €1.5 billion worth of paper in 2011.
The reason behind this success is the large eucalyptus forests that now grow in Portugal. Conservationists take a critical view of these monocultures, but the trees' long fibers provide good raw material for paper. Portucel owns 120,000 hectares (300,000 acres) of woodland and also buys timber from thousands of private landowners. The hunger for raw material is so great that the company has plans for additional timber plantations in the former Portuguese colonies Mozambique and Brazil.
Too High Costs
Export-oriented industries are the ones still doing good business here in this country at the far southwestern corner of Europe. When Portugal joined the EU in 1986, several German corporations became heavily involved here, before the advent of strong competition from locations in Eastern Europe and Asia. Portugal is still benefiting from investments made during that period.
Volkswagen, for example, has 3,600 employees producing its Sharan minivan, as well as its Eos and Scirocco models, at its facility near Setúbal. Production increased by a third last year, with almost 100 percent of vehicles destined for export. German engineering and electronics company Bosch also has several thousand employees in Portugal and runs Europe's largest manufacturing facility for car radios in Braga in northern Portugal. The company's thermotechnology subsidiary is even based in Portugal.
In more recent years, though, German companies have stopped making major investments in Portugal. The country is certainly a competitive location, because salaries haven't risen nearly as much as in Greece, but transportation costs for the 2,000-kilometer (1,200-mile) trip to the periphery of Europe are so high, and local markets so small, that in recent years most companies have preferred to relocate to Asia.
Subsidies from Brussels, meanwhile, meant that many Portuguese citizens felt little incentive to pursue their own ventures. German Chancellor Merkel had sharp criticism for costly bridges and tunnels constructed on the Portuguese island of Madeira, whose governor managed to rack up €6 billion in public debt. The highways around Lisbon are also among the best in Europe.
1 | 2 Next Part 1: Portugal Needs More Money To Stay Afloat Part 2: The Oranges that Are Too Expensive to Pick Article... Print E-Mail Feedback For reasons of data protection and privacy, your IP address will only be stored if you are a registered user of Facebook and you are currently logged in to the service. For more detailed information, please click on the "i" symbol.
Post to other social networks:
Forum Discuss this issue with other readers! Visit Forums... Share your opinion! Keep track of the newsStay informed with our free news services:
All news from SPIEGEL International Twitter | RSS All news from Business section RSS© SPIEGEL ONLINE 2012 All Rights Reserved Reproduction only allowed with the permission of SPIEGELnet GmbH
From DER SPIEGEL The article you are reading originally appeared in German in issue 8/2012 (Feb. 18, 2012) of DER SPIEGEL.Click on the links below for more information about DER SPIEGEL's history, how to subscribe or purchase the latest issue of the German-language edition in print or digital form or how to obtain rights to reprint SPIEGEL articles.
Frequently Asked Questions: Everything You Need to Know about DER SPIEGEL Six Decades of Quality Journalism: The History of DER SPIEGEL A New Home in HafenCity: SPIEGEL's New Hamburg HQ Reprints: How To License SPIEGEL Articles Related Topics Debt Crisis Euro Crisis Austerity Measures DER SPIEGELGraphic: Portugal and Greece compared
Related SPIEGEL ONLINE links US Economist Kenneth Rogoff: 'Germany Has Been the Winner in the Globalization Process' (02/20/2012) Irritation in Athens: 'I Don't Accept Insults to My Country by Mr. Schäuble' (02/16/2012) Wave of Downgrades: Moody's Delivers Damning Verdict on Euro Zone (02/14/2012) Is Portugal Next?: German Finance Minister Suggests Lisbon Bailout Flexibility (02/10/2012) Get Mobile with Our New App Download It Today: 'DER SPIEGEL in English' Now Available for iPhone European Partners PresseuropGreece | Close cut | Cartoon (, )
Greece | No room for error (To Ethnos, Athens)
PolitikenEDITORIAL: Release Khawadja
Congestion charge logjam
Corriere della SeraRAI Loses MiTo Case over Annozero Programme
Mystery over Warning Shots, Times and Enrica Lexie’s Route
Global Partners New York TimesJustices to Hear Case on Affirmative Action in Higher Education
News Analysis: New Bailout Is a Reprieve for Greece, but Doubts Persist
ABC NewsGeorge Huguely Trial: Could He Go Free?
Dow Passes 13,000 Mark for First Time Since 2008
Newsletter SPIEGEL ONLINE Sign up for Spiegel Online's daily newsletter - and get the best of Der Spiegel's and Spiegel Online's international coverage in your In-Box everyday. Facebook Twitter new TWTR.Widget({ version: 2, type: 'search', search: '@SPIEGEL_English', interval: 6000, title: 'Live Postings @SPIEGEL_English', subject: 'SPIEGEL on Twitter', width: 300, height: 250, theme: { shell: { background: '#ffffff', color: '#666' }, tweets: { background: '#ffffff', color: '#444444', links: '#990000' } }, features: { scrollbar: false, loop: false, live: true, hashtags: true, timestamp: true, avatars: true, behavior: 'all' } }).render().start();Follow SPIEGEL_English on Twitter now:
MORE FROM SPIEGEL INTERNATIONAL German Politics Merkel's Moves: Power Struggles in Berlin World War II Truth and Reconciliation: Why the War Still Haunts Europe Energy Green Power: The Future of Energy European Union United Europe: A Continental Project Climate Change Global Warming: Curbing Carbon Before It's Too Late Overview International TOP Home Politik Wirtschaft Panorama Sport Kultur Netzwelt Wissenschaft UniSPIEGEL SchulSPIEGEL Reise Auto Wetter DIENSTE Schlagzeilen RSS Newsletter Mobil VIDEO Nachrichten Videos SPIEGEL TV Magazin SPIEGEL TV Programm SPIEGEL Geschichte SPIEGEL TV Wissen MEDIA SPIEGEL QC Mediadaten Selbstbuchungstool weitere Zeitschriften MAGAZINE DER SPIEGEL Dein SPIEGEL SPIEGEL GESCHICHTE SPIEGEL WISSEN KulturSPIEGEL UniSPIEGEL SPIEGEL GRUPPE Abo Shop SPIEGEL TV manager magazin Harvard Business Man. buchreport buch aktuell SPIEGEL-Gruppe WEITERE Hilfe Kontakt Nachdrucke Datenschutz Impressum TOP
Fans of Carnival celebrations are not the only ones affected -- churchgoers and nationalists will have to make bitter sacrifices as well. In response to this national state of emergency, the Portuguese government plans to do away with four public holidays. Corpus Christi and Assumption are to be crossed off the calendar without a replacement, and public holidays celebrating Portugal's first republic and the 1640 end to its union with Spain can no longer be commemorated, as is customary, with family celebrations and an extended siesta.
Fears of Default
This readiness to make sacrifices comes as welcome news to the so-called troika, made up of the European Commission, the International Monetary Fund (IMF) and the European Central Bank (ECB), whose officials are currently in Lisbon to evaluate the country's reform program. The troika hadn't even asked for such drastic measures, and their austerity watchdogs' findings are sure to be positive. In recent months, the Portuguese government has also implemented brutal tax hikes and cut pensions and unemployment benefits.
All this makes Portugal a poster child for austerity measures in the eyes of Brussels and Berlin. German Finance Minister Wolfgang Schäuble went so far last week as to promise his Portuguese counterpart Vítor Gaspar additional aid, even though the international community has already provided the country with €78 billion ($101 billion) worth of support. "If there would be a necessity for an adjustment of the Portugal (program), we would be ready to do that," Schäuble told Gaspar, who dutifully expressed his thanks. The exchange, caught by a camera crew, quickly became a popular video clip on YouTube.
But does Portugal really have a better chance of avoiding bankruptcy than Greece does? Or is the country simply the next domino destined to fall in the course of the euro crisis?
Financial markets take a far more critical view of Portugal than does the troika. They are assuming there is a 71 percent probability that the country will default within the next five years, as reflected in insurance premiums on Portuguese government bonds -- so-called credit default swaps -- in early February. Deutsche Bank writes that market participants expect that "leading European politicians' assurances notwithstanding, the private sector will become involved in the case of Lisbon as well, or a debt default may even occur."
Collapsing Demand
The €78 billion in aid is enough to last until September 2013, since Portugal has also managed, thanks to the European bailout, to place some short-term bonds on the market. Still, the moment of truth won't be long in coming. "Emergency plans, in case Portugal is not able to return to the capital market, need to be specified soon and in a credible fashion," major Swiss bank Credit Suisse says.
For now, Portugal finds itself in a deep recession. As a result of the government's drastic austerity measures, most people have considerably less money at their disposal than they had before. With domestic demand collapsing, unemployment has risen to record levels. Last year, 30 percent fewer cars were sold in Portugal.
At least 200,000 people marched through the streets of Lisbon on Feb. 11, starting in three different areas of the city and converging on the centrally located Praça do Comércio on the Tagus River. "No to inequality, no to impoverishment," they shouted.
Just as in demonstrations that have taken place in Greece, German Chancellor Angela Merkel was a favorite subject of their signs. One showed the chancellor as a dominatrix, forcing a naked Prime Minister Coelho to his knees.
Competitive on the Global Market
Rogério Hortelão is one person who hasn't lost his optimism despite all the problems. "We're good at improvising," says the president of auto parts supplier Incompol. Hortelão, a former mechanic with the Portuguese Air Force, started his business 25 years ago with a lathe and three men. Now, 350 employees at his factory in Samora Correia use heavy equipment to stamp out metal components for BMW and other customers. In 2009, the last time that demand within the automotive industry collapsed, Hortelão took the same approach to fighting the crisis as many mid-sized German companies did. He didn't fire a single employee, but instead gave them further training. It enabled him to fulfill a personal dream. Incompol now uses high-tech equipment to weld together individual components for aircraft manufacturers such as Embraer in Brazil and Pilatus in Switzerland.
Most of Hortelão's products go to buyers in other countries, and even his domestic customers are subsidiaries of international corporations. This allows the company to remain independent of the government's austerity programs.
Unlike Greece, Portugal certainly has competitive companies capable of succeeding on the global market. Europe's largest and most modern paper factory, for example, is located near the Portuguese port city of Setúbal.
Portugal has gradually overtaken Scandinavia when it comes to producing high quality copy paper. "Each year we sell each person in Germany at least 500 sheets of paper for photocopying," Hermano Mendonça, marketing director for Portucel, says in fluent English. Portucel, a publicly traded company that is majority owned by a single Portuguese family, exported nearly €1.5 billion worth of paper in 2011.
The reason behind this success is the large eucalyptus forests that now grow in Portugal. Conservationists take a critical view of these monocultures, but the trees' long fibers provide good raw material for paper. Portucel owns 120,000 hectares (300,000 acres) of woodland and also buys timber from thousands of private landowners. The hunger for raw material is so great that the company has plans for additional timber plantations in the former Portuguese colonies Mozambique and Brazil.
Too High Costs
Export-oriented industries are the ones still doing good business here in this country at the far southwestern corner of Europe. When Portugal joined the EU in 1986, several German corporations became heavily involved here, before the advent of strong competition from locations in Eastern Europe and Asia. Portugal is still benefiting from investments made during that period.
Volkswagen, for example, has 3,600 employees producing its Sharan minivan, as well as its Eos and Scirocco models, at its facility near Setúbal. Production increased by a third last year, with almost 100 percent of vehicles destined for export. German engineering and electronics company Bosch also has several thousand employees in Portugal and runs Europe's largest manufacturing facility for car radios in Braga in northern Portugal. The company's thermotechnology subsidiary is even based in Portugal.
In more recent years, though, German companies have stopped making major investments in Portugal. The country is certainly a competitive location, because salaries haven't risen nearly as much as in Greece, but transportation costs for the 2,000-kilometer (1,200-mile) trip to the periphery of Europe are so high, and local markets so small, that in recent years most companies have preferred to relocate to Asia.
Subsidies from Brussels, meanwhile, meant that many Portuguese citizens felt little incentive to pursue their own ventures. German Chancellor Merkel had sharp criticism for costly bridges and tunnels constructed on the Portuguese island of Madeira, whose governor managed to rack up €6 billion in public debt. The highways around Lisbon are also among the best in Europe.
1 | 2 Next Part 1: Portugal Needs More Money To Stay Afloat Part 2: The Oranges that Are Too Expensive to Pick Article... Print E-Mail Feedback For reasons of data protection and privacy, your IP address will only be stored if you are a registered user of Facebook and you are currently logged in to the service. For more detailed information, please click on the "i" symbol.
Post to other social networks:
Forum Discuss this issue with other readers! Visit Forums... Share your opinion! Keep track of the newsStay informed with our free news services:
All news from SPIEGEL International Twitter | RSS All news from Business section RSS© SPIEGEL ONLINE 2012 All Rights Reserved Reproduction only allowed with the permission of SPIEGELnet GmbH
From DER SPIEGEL The article you are reading originally appeared in German in issue 8/2012 (Feb. 18, 2012) of DER SPIEGEL.Click on the links below for more information about DER SPIEGEL's history, how to subscribe or purchase the latest issue of the German-language edition in print or digital form or how to obtain rights to reprint SPIEGEL articles.
Frequently Asked Questions: Everything You Need to Know about DER SPIEGEL Six Decades of Quality Journalism: The History of DER SPIEGEL A New Home in HafenCity: SPIEGEL's New Hamburg HQ Reprints: How To License SPIEGEL Articles Related Topics Debt Crisis Euro Crisis Austerity Measures DER SPIEGELGraphic: Portugal and Greece compared
Related SPIEGEL ONLINE links US Economist Kenneth Rogoff: 'Germany Has Been the Winner in the Globalization Process' (02/20/2012) Irritation in Athens: 'I Don't Accept Insults to My Country by Mr. Schäuble' (02/16/2012) Wave of Downgrades: Moody's Delivers Damning Verdict on Euro Zone (02/14/2012) Is Portugal Next?: German Finance Minister Suggests Lisbon Bailout Flexibility (02/10/2012) Get Mobile with Our New App Download It Today: 'DER SPIEGEL in English' Now Available for iPhone European Partners PresseuropGreece | Close cut | Cartoon (, )
Greece | No room for error (To Ethnos, Athens)
PolitikenEDITORIAL: Release Khawadja
Congestion charge logjam
Corriere della SeraRAI Loses MiTo Case over Annozero Programme
Mystery over Warning Shots, Times and Enrica Lexie’s Route
Global Partners New York TimesJustices to Hear Case on Affirmative Action in Higher Education
News Analysis: New Bailout Is a Reprieve for Greece, but Doubts Persist
ABC NewsGeorge Huguely Trial: Could He Go Free?
Dow Passes 13,000 Mark for First Time Since 2008
Newsletter SPIEGEL ONLINE Sign up for Spiegel Online's daily newsletter - and get the best of Der Spiegel's and Spiegel Online's international coverage in your In-Box everyday. Facebook Twitter new TWTR.Widget({ version: 2, type: 'search', search: '@SPIEGEL_English', interval: 6000, title: 'Live Postings @SPIEGEL_English', subject: 'SPIEGEL on Twitter', width: 300, height: 250, theme: { shell: { background: '#ffffff', color: '#666' }, tweets: { background: '#ffffff', color: '#444444', links: '#990000' } }, features: { scrollbar: false, loop: false, live: true, hashtags: true, timestamp: true, avatars: true, behavior: 'all' } }).render().start();Follow SPIEGEL_English on Twitter now:
MORE FROM SPIEGEL INTERNATIONAL German Politics Merkel's Moves: Power Struggles in Berlin World War II Truth and Reconciliation: Why the War Still Haunts Europe Energy Green Power: The Future of Energy European Union United Europe: A Continental Project Climate Change Global Warming: Curbing Carbon Before It's Too Late Overview International TOP Home Politik Wirtschaft Panorama Sport Kultur Netzwelt Wissenschaft UniSPIEGEL SchulSPIEGEL Reise Auto Wetter DIENSTE Schlagzeilen RSS Newsletter Mobil VIDEO Nachrichten Videos SPIEGEL TV Magazin SPIEGEL TV Programm SPIEGEL Geschichte SPIEGEL TV Wissen MEDIA SPIEGEL QC Mediadaten Selbstbuchungstool weitere Zeitschriften MAGAZINE DER SPIEGEL Dein SPIEGEL SPIEGEL GESCHICHTE SPIEGEL WISSEN KulturSPIEGEL UniSPIEGEL SPIEGEL GRUPPE Abo Shop SPIEGEL TV manager magazin Harvard Business Man. buchreport buch aktuell SPIEGEL-Gruppe WEITERE Hilfe Kontakt Nachdrucke Datenschutz Impressum TOP
In more recent years, though, German companies have stopped making major investments in Portugal. The country is certainly a competitive location, because salaries haven't risen nearly as much as in Greece, but transportation costs for the 2,000-kilometer (1,200-mile) trip to the periphery of Europe are so high, and local markets so small, that in recent years most companies have preferred to relocate to Asia.
Subsidies from Brussels, meanwhile, meant that many Portuguese citizens felt little incentive to pursue their own ventures. German Chancellor Merkel had sharp criticism for costly bridges and tunnels constructed on the Portuguese island of Madeira, whose governor managed to rack up €6 billion in public debt. The highways around Lisbon are also among the best in Europe.
Post to other social networks:
Stay informed with our free news services:
© SPIEGEL ONLINE 2012 All Rights Reserved Reproduction only allowed with the permission of SPIEGELnet GmbH
Click on the links below for more information about DER SPIEGEL's history, how to subscribe or purchase the latest issue of the German-language edition in print or digital form or how to obtain rights to reprint SPIEGEL articles.
Graphic: Portugal and Greece compared
Greece | Close cut | Cartoon (, )
Greece | No room for error (To Ethnos, Athens)
EDITORIAL: Release Khawadja
Congestion charge logjam
RAI Loses MiTo Case over Annozero Programme
Mystery over Warning Shots, Times and Enrica Lexie’s Route
Justices to Hear Case on Affirmative Action in Higher Education
News Analysis: New Bailout Is a Reprieve for Greece, but Doubts Persist
George Huguely Trial: Could He Go Free?
Dow Passes 13,000 Mark for First Time Since 2008
Follow SPIEGEL_English on Twitter now:
Read Full Article »
