If the Eurozone should falter

Portugal seems the next in line on the sovereign debt crisis of the euro zone. After Greece and Ireland it could, if not checked, proceed after Portugal towards Spain, Italy, France. The financial markets seem bent on doubt about the euro process.The case of Portugal is significantly different from the two standing victims of the creditors. The Hellenic economic is virtually bankrupt. It was the only of the euro countries never to had uphold the Stability and Growth Pact conditions. Having cheated on statistics in order to be admitted in 2001, its budget deficit is for 30 years above the 3% of GDP limit. It is thus reasonable markets doubt its austerity commitments. In particular European Union’s reluctance in admitting this fact is a basic flaw in all the recent efforts of containment.Ireland, with a good track record on public finances, was contaminated by a banking sector bust, whose real size is still to be determined. Although it is too much to say Ireland is bankrupt, there is a serious financial situation to be accessed.Portugal is the third of the series, the only in which, by 2008 there could be doubts whether a financial punishment was necessary. It is true that, ever since the initial steps towards monetary unification the external debt has been rising. Gross debt for the total economy (IMF definition) was 28% of GDP at the Maastricht Treaty signature in 1992, reached 93% at the moment of unification, in 1999, and was 238% of GDP in 2010. Of this, about a quarter is public external debt, which Europe was allegedly supervising. Actually during the period government debt almost reversed its composition. It was 93% domestic and 7% foreign in 1992, and these values were 25%-75% respectively in 2009.It is rather obvious that the participation in the stability club of the euro, with the consequent drastic reduction in interest rates, even before accession, was the reason for this ruinous path. But it could be said that the levels reached in 2008, at the start of the crisis, were still sustainable, being at 198% of GDP for total and 58% of GDP for public debt. Portugal at the time was on the knife edge, believably being able to avoid a financial collapse with early and strong measures.The first real problem was political. The crisis, having started in September 2008, caught the country on the verge of an election period. In 2009 there were three suffrages, the September intermediate one for parliament and government. The result was that the first year after Lehman Brothers collapse saw Portugal in a delirium of fiction, with the government trying to prove there was nothing wrong with our financial position. Consequently the seriousness of the situation was only assumed, early in 2010, by the reelected (now minority) executive. Only then, one and a half years too late, were significant measures announced.But this late adjustment still failed for some months, now for administrative reasons. The lobbies and pressure groups, guessing the impending austerity, were able to anticipate benefits and avoid punishment all throughout 2010. Only by early 2011, with the forth consecutive package of austerity, did public expenditure show any signs of subsiding. By them the markets had lost all confidence in the Portuguese authorities and these had also spent its internal political credit. The Government felled on March 23, 2011.Since late 2010 it is obvious the country is bound to ask European financial support. The problem is deeper, as doubts increase about to efficacy of this help. The Portuguese comedy of errors, which in two years turned a delicate into a untenable position, is part of a much more complex European environment. With the third of the euro countries in trouble, this is now, not just an individual question, but a problem for the zone. Worse, Greek and Irish supports have failed to calm the markets. Public debt rates have not subsided, as they usually do with the classical IMF programs. European rescues only fudged the issue.