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posted on 02 November 2015

Portugal: The Euro Zone Strikes Back

by Dirk Ehnts, Econoblog101

While the German press does not seem eager to report this (for instance, there is no article on SPON),

one can turn to British (non-euro zone) news to get the story (from The Telegraph):

Eurozone crosses Rubicon as Portugal's anti-euro Left banned from power

Constitutional crisis looms after anti-austerity Left is denied parliamentary prerogative to form a majority government

Portugal has entered dangerous political waters. For the first time since the creation of Europe's monetary union, a member state has taken the explicit step of forbidding eurosceptic parties from taking office on the grounds of national interest.

Anibal Cavaco Silva, Portugal's constitutional president, has refused to appoint a Left-wing coalition government even though it secured an absolute majority in the Portuguese parliament and won a mandate to smash the austerity regime bequeathed by the EU-IMF Troika.

He deemed it too risky to let the Left Bloc or the Communists come close to power, insisting that conservatives should soldier on as a minority in order to satisfy Brussels and appease foreign financial markets.

That is what the euro has done to Europe, intentionally or not. Before, the Portuguese did not have the problem of foreigners holding their debts and if so, they held them in escudos. If the exchange rate dropped, it was the problem of the investor, not the Portuguese government. In the context of what was done to the Greeks this should not surprise anyone.

As it stands, Europe is sacrificing, or better, has sacrificed democracy for the euro. Most political parties are absolutely ok with that. It is up to voters now to express their opinion. However, it seems that their voice will be ignored if the popular demands do not coincide with those of "Brussels and [..] foreign financial markets". (I assume that The Telegraph uses financial markets as a polite phrase instead of rich people.) Francis Coppola at Forbes compares Europe to the Soviet Union, by the way. I think that there is a difference - the Soviet Union never claimed to be democratic - but from the actual results in Greece and Portugal one might expect things to deteriorate. There is still time to revive the ideals of European Enlightenment. Nevertheless, it is getting shorter and shorter...

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