Eurozone crisis: The deepening problems for Portugal

15th August 2012

The Official View

This was expressed in the letter written to the International Monetary Fund at the end of June by the Minister of Finance and the Governor of the Bank of Portugal:

"Our economic and financial program is on track. All quantitative performance criteria and structural benchmarks for the fourth review were met, sometimes with minor delays. Economic activity has been stronger than expected in the past few months, reflecting mainly the dynamism of exports. As a result, external adjustment has continued to proceed at a faster pace than initially envisaged. In spite of this, however, unemployment has increased significantly. Budget execution so far this year has been generally in line with projections."

A nice gloss on the situation but I am sure some of you are already wondering how "Economic activity has been stronger than expected" fits with "unemployment has increased significantly". It certainly does not for the increased numbers of unemployed! And we are left wondering how the two can go together.

What is the employment situation in Portugal?

The latest update tells us this:

"The unemployment rate estimated for the 2nd quarter of 2012 was 15.0 per cent. This value is up 2.9 percentage points from the same quarter of 2011 and 0.1 percentage points from the previous quarter.

There were 826.9 thousand unemployed people, which corresponds to an year-on-year increase of 22.5 per cent and to

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