Since 1974, only three countries have managed surpluses that … – The Associated Press

             

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Getting high surpluses for at least a decade, as required to Portugal to ensure the sustainability of its debt, is a task that was accomplished in the past only in “exceptional” cases, argues a study by two economists, not found in the historical data analyzed more than three examples of successful countries in this type of effort.

                 

                      The study – titled “ Surplus of Ambition: Europe Can Rely on Large Primary Surpluses to Solve its Debt Problem ” – try to understand by looking at time series of emerging countries classified as advanced and , how often were able to generate significant primary surpluses and in what conditions did, in situations where needed consolidate their public accounts .

The aim of the authors – the U.S. economist Barry Eichengreen and Ugo Panizza Italian – associated with the strategy outlined by European leaders to solve the problem of public debt in the euro zone and that means securing for the next few years, significant budget surpluses by the majority of countries and, in particular, the countries where the crisis was more severe.

This is the case of Portugal. According to the study, the country needs to register a primary budget surplus (excluding interest) average of 5.9% of GDP over the ten years between 2020 and 2030, the last year to achieve a situation of sustainability public debt.

Looking at data from 54 advanced and emerging countries during the period 1974-2013, the authors attempt to find sufficiently long periods of fiscal consolidation in a nation able to provide an average primary surplus above 3%, 4% or 5%. The conclusion they reach is that, looking at periods of at least ten years, there are 12 episodes of countries that have higher surpluses than 3%. Above 4%, since they are only five countries. And above 5%, what is now asked Portugal, resist only three: Belgium in 1995, Norway in 1999 and Singapore in 1990

The authors conclude that achieving fiscal consolidations as pronounced during periods. such long time is a feat, “although not unknown, is exceptional.” And note that the three cases in which surpluses greater than 5% occurred for ten years “are special.” “They are economic and politically idiosyncratic, in the sense that are not explained by the usual political and economic correlations.”

Few odds of success for Portugal
the analysis that make with data from 54 countries, the authors come to the conclusion that prolonged periods of budget surpluses “most likely occur when economic growth is strong, the balance with the outside is positive (savings rates are high), the debt ratio is High (stressing the urgency of an external adjustment) and the parties of the government control all parliamentary chambers (your bargaining power is strong). ” The study also concludes that, “historically, it is more likely that leftist governments are able and persistent primary surpluses.”

Given these data and comparing them with what the European countries are preparing to try , the authors see little likelihood of success. “This analysis leaves us optimistic that European countries in crisis are able to register as large and persistent primary surpluses as those who are officially projected,” write in the conclusion of his study.

Speaking to PUBLIC , and asked if Portugal was entitled to reach its fiscal targets and become one of the more exceptional cases, Barry Eichengreen, a professor at the University of California, Berkeley, proved pessimistic. “Being exceptional demands the combination of two factors: a strong external pressure and strong domestic budgetary institutions. Portugal obviously fulfills the first point but not the second, “he says.

In addition, notes that the fact that Portugal is accompanied by many other countries in this effort worsens their prospects. “When everyone is consolidating, the negative impact on the product is larger and fiscal consolidation becomes more difficult to sustain,” he says.

With all these difficulties which are the alternatives to Portugal? Eichengreen sees two possible scenarios. “The European Central Bank will have to help with a higher rate of inflation and Germany will have to help with a bigger budget support growth, otherwise the debt will have to be restructured,” he says.