STAFF NEWS & ANALYSIS
Portugal Advised to Beg
By Staff News & Analysis - March 31, 2011

Portugal should pass the hat among former colonies … So it turns out that fiscally challenged Portugal has another option besides an onerous bailout from its euro-zone partners, once the government decides it can no longer live with the crippling premiums being demanded in the bond market to cover its external financing needs. The lifeline is being extended by Brazil, its one-time colony, which has emerged as a global economic and financial force– even as Portugal slowly sinks in a fiscal quicksand of its own making. Lisbon, whose caretaker government is merely treading water until an expected summer election, has to roll over close to €10-billion in debt between April and June. "Yes, Brazil could help Portugal, just as Portugal helped Brazil economically," Brazilian President Dilma Rousseff declared during an official visit to the European country. – Canada Globe and Mail

Dominant Social Theme: There is a solution to every economic crisis, even PIGish over-spending. Friends help friends, after all, and nations help nations. Heck, the colonial era wasn't so bad after all. Portugal was fairly sweet to its colonies, wasn't it? We kinda miss those days. Let's throw tens of billions their way.

Free-Market Analysis: So now we know, perhaps, what US President Barack Obama was REALLY doing in Brazil last week. Is it coincidence? President Obama jets down to Brazil to talk to its (formerly Communist) president and she soon announces (see article excerpt above) that Brazil is glad to extend a "lifeline" to Portugal. Apparently, she is nostalgic over all the black-skinned people that Portugal brutally murdered centuries ago.

Scratching your head? Come on, dear reader – the European Union is surely (in part, anyway) an Anglo-American invention! We know it's fashionable to mutter that the EU is in fact a peaceable Nazi takeover (clever Germans!), but as we try to point out whenever we can, it's probably not. Britain and America bestrode the world after World War II. If the Anglo American power-elite hadn't wanted an EU (then a trading pact) there wouldn't be one today. It is impossible in our view to argue otherwise.

People were surprised to find, when US banking documents were released last year ago, that the Fed had made huge low interest (no interest?) loans to a variety of European entities during the height of 2008 financial crisis. Why was the Fed involved, people asked? The Anglosphere is going to protect its investment if it can.

Of course, it's frustrating these days. The elites had lined up Japan to buy European debt from long-suffering Southern PIGS, but an inconvenient earthquake has made that unfeasible. Another candidate had to be found. Fortunately one was waiting in the wings. Who would have known that a former a Marxist, rebel leader (now president of Brazil) held such fond memories of Portugal, once of the bloodiest of European states when it came to managing its overseas colonies. But apparently Brazilian President Dilma Rousseff recalls those days happily. And she is happy to help. Who knew?

Portugal in fact will need all the help it can get. An article in the UK Telegraph informed us yesterday that "Stricken Portugal lacks the cash to meet debt payments." That doesn't sound promising. The government is apparently denying it, but who believes southern European governments anymore?

Barclays Capital doesn't. "The debt-laden nation faces around €9bn (£7.9bn) in bond redemptions by June, but currently has no more than €5bn in cash," the Telegraph quotes Barclays' analysts as estimating. "Portugal needs to find financing in the coming weeks in some way … In our opinion, Portugal is likely to find financing, but it is not in a comfortable position," they declare.

Barclays may be "optimistic," but Portugal's 10-year bonds, we learn from the Telegraph, "are trading with yields at euro-era highs of over 8pc, as investors demand more reward for taking on the risk." Kathleen Brooks, a research director at trading platform Forex.com, says the "writing is on the wall" and that an EU bailout will take place sooner or later, the Telegraph reports.

Portugal's current prime minister may not be around to see it, however. He resigned last week (as we reported) after the Portuguese Parliament voted against his austerity budget. He said he could no longer run the government. Standard & Poor's, then downgraded Portugal's sovereign debt rating not once but twice. When it rains, it pours.

EU Bust-Up Seems Closer AS Portuguese Default Looms

The Telegraph article also notes that EU bailouts are counterproductive in a sense because capital tends to flow toward countries with bailouts. This only aggravates the problems that other Southern PIGS (think Spain) are having without bailout money. Also, a country like Ireland that has received bailout money under expensive terms struggles more than a country like Greece that is able to negotiate better terms.

Ireland is locked in a bitter battle with France over its low corporate tax, which EU leaders want to do away with. The logic seems to be that they want to denude Ireland not just of public funds but of all the large businesses that it has attracted over the years. This is the way the EU "helps" its member states.

Brazil's former president, Luiz Inacio Lula da Silva, who is for some reason also in Portugal at the moment (along with Britain's Prince Charles) harbors no illusions about the EU or its allies. He "flatly told officials to forget about relying on the European Union or the International Monetary Fund." Said Lula: "The IMF won't resolve Portugal's problem, like it didn't solve Brazil's."

This quote comes to us courtesy of the Globe and Mail, which innovatively elaborates on Dilma Rousseff's sudden generosity. "Maybe the Brazilians are on to something here," the Globe and Mail declares. "Why not pass the hat among the old Portuguese colonies – Macau has plenty of gambling revenue, fast-growing Angola has oil and diamonds and Goa is easily the wealthiest state in India – and give them the satisfaction of having their former colonial master in their debt for years to come."

The Globe and Mail sees the situation in stark terms, especially given the S&P downgrades, which it calls "catch up." The article adds, "No one seriously thinks either country will resolve its fiscal miseries without seeking to extend the terms on maturing bonds or turning to other tried-and-true financing tricks that all amount to the same thing: forcing lenders to share some of the pain … Portugal's bond rating now stands one lonely notch above junk status, which means a lot of institutional investors can't own its debt. But that may be a moot point. The yield on Portugal's 10-year bond soared to 8 per cent on Tuesday, breaking its own record high for a euro-zone member."

Anyone reading our modest pages knows that we have been consistently negative about the massive mess that is today known as the European Union. The idea that Portugal's former colonies are going to bail it out of its current circumstances seems absurd to us (though surely stranger things have happened).

The larger point is that the Anglo-American power elite (and the European states as well) are getting increasingly desperate. The initial bail-out fund was supposed to end the crisis. Then the next iteration was. (Already we are losing track.) Even though the problem was solved, Japan (and China) were recruited to purchase PIGS government paper. Japan, hit by an earthquake, needs all the liquidity it can get and won't be buying junk PIGS paper for a long time. Enter Brazil.

Editor's Note: Our elves were busily wrapping up this issue when we happened to read a photo caption of the online Telegraph article (quoted above), as follows: "A makeshift billboard [calls] for a workers' protest on April 1 … Words on the billboard read: "Demonstration, Young workers, We want work with rights." SAY WHAT? As we've reported, the destabilizations in the Middle East and Northern Africa are being accomplished in part by CIA-backed "youth movements;" but the CIA, in fact, has a well-documented history of meddling in Europe (see Operation Gladio). This photo with the billboard specifically soliciting "youth" set us to pondering. Have the powers-that-be decided to create and support similar destabilizing youth movements in Europe? Is it possible? We've pointed out previously that the tribes of Europe probably will not stand for the kinds austerity-solutions that are being offered; but we've also written that we believe the Anglosphere is helping raise tension and even violence the world over so as to create an opening for world government and a new world currency (see other article, this issue). Are the Western powers-that-be, then, restricting their activities to developing countries or are they actively helping to organize the very sorts of popular EU protests that they claim to be addressing through European bailouts? That would be most cynical, wouldn't it?

After Thoughts

We have long been doubtful of Europe's ability to navigate this unrolling, never-ending, crisis without some sort of serious realignment. On our best days, we entertain the mild hope that the whole thing will just fall apart. More likely the EU will just shrink, along with the eurozone itself. Austerity itself has not been well received (see Britain) and we would have to think that the springtime season will usher in a renewed civil disorder and increased pressure on the EU for fundamental adjustments.

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