The troika speaks on Portugal

The "troika" behind the European bailouts–the European Commission, the European Central Bank, and the International Monetary Fund–has just released a statement on Portugal. Troika representatives were in Portugal between August 1 and August 12 to assess the effect of the almost $80 billion euro bailout and the government’s willingness to reform. The overall assessment was ...

By , a professor at Indiana University’s Hamilton Lugar School of Global and International Studies.

The "troika" behind the European bailouts--the European Commission, the European Central Bank, and the International Monetary Fund--has just released a statement on Portugal. Troika representatives were in Portugal between August 1 and August 12 to assess the effect of the almost $80 billion euro bailout and the government's willingness to reform. The overall assessment was positive:

The "troika" behind the European bailouts–the European Commission, the European Central Bank, and the International Monetary Fund–has just released a statement on Portugal. Troika representatives were in Portugal between August 1 and August 12 to assess the effect of the almost $80 billion euro bailout and the government’s willingness to reform. The overall assessment was positive:

In our assessment the program is on track. We welcome the new government’s commitment to the ambitious and comprehensive program agreed in May 2011 and take note of its determination to accelerate implementation in key areas….

Economic growth and inflation for the year as a whole are expected to remain in line with the program framework. Exports have been relatively strong; consumer confidence indicators are steady; and employment has remained broadly stable.

While GDP is expected to contract by 2.2 percent this year we still project a recovery to begin taking hold in early 2013. We appreciate the authorities’ strong commitment to the program’s fiscal consolidation path, including the measures to redress recent slippages in expenditure controls during the first semester.

On account of these revenue-increasing measures, we expect that the fiscal deficit will be limited to 5.9 percent of GDP in 2011, as programmed. We will also continue to work closely with the authorities to strengthen public financial management and ensure that fiscal performance remains on track in 2011 and beyond.

But the troika also warned that most of the work is ahead for Portugal:

While the reforms are generally off to a promising early start, most of the difficult changes still lie ahead and the authorities’ resolve in this regard will undoubtedly be fiercely tested by opposition from vested interests.

It’s worth noting that in troika-speak opposition to economic reform comes from "vested interests" rather than, say, ordinary Portuguese citizens or certain political parties. Why pick a fight with them when you can oppose "vested interests"?

More importantly: let’s say the troika team felt that the Portugal program was not going well at all. Would they ever say so? At a moment of exquisite economic fragility would these institutions say anything that might tip the markets into another tailspin?

David Bosco is a professor at Indiana University’s Hamilton Lugar School of Global and International Studies. He is the author of The Poseidon Project: The Struggle to Govern the World’s Oceans. Twitter: @multilateralist

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