National Debt of Portugal

Portugal is an amazingly beautiful country. Alas, the national debt of Portugal is not nearly as appealing. In fact, the Portugal debt level is downright scary.

PIIGS

Portugal is part of what is known as the PIIGS. No, that isn’t spelled wrong. It represents the initial of each country in the European Union, often referred to as the Euro Zone, that has major debt problems that may require help from other countries. The PIIGS are Portugal, Ireland, Italy, Greece and Spain. Obviously, Ireland and Greece have already needed help. As I write this, many think Portugal will be the next country to be bailed out.

Portugal Debt

The national debt of Portugal as of the middle of 2010 is $497.5 billion. This is nothing compared to the debt of countries like the United States and Germany. Portugal, however, is a much smaller country with a much smaller economy. When viewed as a percentage of the gross domestic product of the country, the debt crisis becomes clearer. Portugal debt levels exceed 93 percent of its GDP. Anything above 90 percent is considered a major problem. Anything above 100 percent can result it he currency being ruined and the economy being crushed. In short, Portugal debt levels have put the country in hot water and it knows it.

Fighting Back

To its credit, Portugal has tried to do something about the problem instead of just begging for relief from the EU. The country has slashed spending while upping taxes to try to pay down the debt. The question is whether it is in so deep a hole that it is too late for the austerity changes to make a difference. There is no clear answer. Only time will really tell which way this goes, but the answer should be indicative of whether other countries in similar situations fall or not.

The national debt of Portugal is certainly one of the more worrying situations in Europe. It is also a bell weather focal point for the EU. Economically strong countries like Germany cannot be pleased that they have to bailout other EU members who run up debt. This has led to the rather obvious question of whether the EU will survive if the PIIGS all need help. One has to think the people of the better off countries would rail against having to pick up the tab for the worse off brethren. This makes the Portugal debt problem a bit of a litmus test.

If Portugal and all the other PIIGS fail, look for the EU to become much smaller in the future.

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