Anyone notice a pattern? The banks bring about economic armageddon. Governments bail out the banks Carte blanche and then insist on screwing workers everywhere, from pensions to retirement to wages. The new crisis is under the guise that nation must now get out of debt.
What's wrong with this picture? Quite a bit according to Portugal's Parliament:
Opposition parties said the budget - the fourth package of austerity measures in a year - went too far.
"Today, every opposition party rejected the measures proposed by the government to prevent that Portugal resort to external aid," Mr Socrates said in a televised address.
"The opposition removed from the government the conditions to govern."
The vote late on Wednesday came on the eve of a European Union summit to finalise a eurozone debt crisis plan.
On Thursday, Eurozone leaders begin a two-day summit during which they hope to finalise details of a "grand bargain" to deal with the 17-nation group's debt burden.
The country's borrowing costs have surged as investors worried over its financial health.
Lisbon has argued its situation is different from Greece and the Irish Republic - both of which have agreed to bail-outs from the European Union and International Monetary Fund.
It says that its deficit and debt are lower than those nations, that it has not suffered a bubble in property prices and that its banks are sound.
Jose Socrates, Portugal's prime minister, resigned in protest that his plan was rejected. While Parliament won this round, when the EU and IMF come knocking, odds on Portugal's workers are going to lose.
Now Portugal bonds are soaring while U.S. Treasury Secretary Tim Geithner is planning to exempt $4 trillion in currency derivatives from any oversight.
Tell me you can't short a country.
The spread between Portuguese and German bonds widened on Wednesday. The yield on 10-year Portuguese government bonds was last at 7.837%, according to Dow Jones Newswires, stuck well above 7%, which many observers see as unsustainably high.
From the LA Times:
The breakdown in Portugal weighed on the euro, which had reached a one-year high against the dollar on Monday. The euro slid to $1.409 from $1.420 on Tuesday and $1.423 on Monday.
Socrates The Portuguese government’s collapse could further drive up the country’s cost of borrowing, already at high levels. That may mean that Portugal will have no choice but to turn to the European Union’s bailout fund for financially distressed member nations.
What the press does not every mention is what is in these plans. The austerity measures, just rejected by Portugal, removed help for homeowners, laid off 900 public sector workers, froze retirement, taxed pensions and of course cut social services and social safety nets.
Now Portugal is heading towards the same austerity agenda, (read attack workers, wages and retirement) that Greece and Ireland have suffered.
Meanwhile the people are almost in revolt:
In ways big and small, Europeans from Greece to Portugal, from Britain to Bavaria are registering their growing anger with the relentless assault inflicted by government-imposed austerity programs.
Wages, working conditions and pensions that unions successfully fought for over the past half century are threatened by the collapse of banking systems caught up in a decade-long orgy of speculation that the average European neither took part in, nor profited from. Even the so-called "well off" workers of Bavaria, Germany's industrial juggernaut, have seen their wages, adjusted for inflation, fall 4.5 percent over the past 10 years.
The narrative emanating from EU headquarters in Brussels is that high wages, early retirement, generous benefits, and a "lack of competition" has led to the current crisis that has several countries on the verge of bankruptcy, including Ireland, Greece, Portugal and Spain. Now, claim the "virtuous countries"—Germany, the Netherlands, and Finland—it is time for these spendthrift wastrels to pay the piper or, as German Chancellor Andrea Merkel says, "do their homework."
It is an interesting story, a sort of Grimm's fairly tale for the 21st century, but it bears about as much resemblance to the cause of the crisis as Cinderella's fairy godmother does to the International Monetary Fund (IMF).
While each country has its own particular conditions, there is a common thread that underlines the current crisis. Starting early in the decade, banks and financial houses flooded real estate markets with money, fueling a speculation explosion that inflated an enormous bubble. In climate and culture, Spain and Ireland may be very different places, but housing prices rocketed 500 percent in both countries.
The money was virtually free, with low interest rates on the bank side, and cozy tax deals cut between speculators and politicians on the other. That kept the cash within a small circle of investors. While Bavarian workers were watching their pay fall, German banks were taking in record profits and shoveling yet more capital into the real estate bubbles in Ireland and Spain. The level of debt eventually approached the grotesque. Ireland's bank debts, if translated into dollars, would be the equal of $10 trillion.
The Wall Street implosion in 2008 sent shock waves around the world and popped bubbles all over Europe. While nations on the periphery of the European Union (EU) tanked first—Iceland, Ireland, Latvia, Romania, Hungry, and Greece, economies at the heart of the EU—Britain, Spain, Italy, and Portugal—were also shaken. According to the Financial Times (FT), total claims by European banks on the Greek, Irish, Italian, Spanish and Portuguese debts alone are $2.4 trillion.
The European Union's (EU) cure for the crisis is a formula with a long and troubled history, and one that has sowed several decades of falling living standards and frozen economies when it was applied to Latin America some 30 years ago. In simple terms, it is austerity, austerity and more austerity until the bank debts are paid off.
Of course defense budgets or lord forbid, a nationalization of the financial sector and getting the people's money back isn't in the cards. But what does one expect in a rigged game?