US urges Europe to substitute growth for austerity
This week, America's new treasury secretary, Jack Lew, demanded that Europe do more to grow its austerity-afflicted economy amid concerns that Portugal is heading towards its second international bailout.
Reflecting deep anxiety in the Obama regime about the risks posed by the single currency's prolonged double-dip recession, Lew used a visit to Brussels to urge expansionary measures.
"Our economy's strength remains sensitive to events beyond our shores and we have an immense stake in Europe's health and stability," Lew said. "The United States has no bigger, no more important economic relationship than it does with Europe.
"I was particularly interested in our European partners' plans to strengthen sources of demand at a time of rising unemployment."
The call came as Germany's finance minister, Wolfgang Schauble, insisted that Portugal find new ways to make budget cuts after the country's Constitutional Court threw out measures designed to save money.
"Portugal has made lots of progress in the last year to gain access to financial markets. But after this [court] decision it will have to find new measures," Schauble said.
Portugal has cut spending by €13-billion — 8% of national output — since it was bailed out by the so-called troika of the European Union (EU), the European Central Bank and the International Monetary Fund two years ago.
Austerity has taken its toll on the Portuguese economy, which shrank by more than 3% last year, and late last week the court ruled against plans to trim an additional €1.3-billion from the budget this year through cuts in sick pay and unemployment benefits.
Jose Manuel Barroso, president of the European Commission, urged Europe's finance ministers to grant Portugal more time to meet the tough terms of its bailout loan after Prime Minister Pedro Passos Coelho said he would make up the shortfall from savings in health and education budgets.
EU finance ministers are due to decide on requests from Portugal and Ireland to extend the maturities of their loans when they meet in Dublin on April 12 and 13.
Barroso said he welcomed Portugal's reaffirmed commitment to making the cuts.
"This is vital. It is vital in order to maintain and boost Portugal's credibility, and to enable the country to find under its own steam the funding its economy needs."
A finance ministry spokesperson said the court's decision would result in an unscheduled visit from the troika.
"The court decision created an uncertainty which justifies this visit in-between reviews, as do the spending cuts that the government promised to present by the end of April or beginning of May." — © Guardian News & Media 2013