Portugal, Long Seen As European Austerity’s Success is Not Becoming Another European Austerity Failure

How Many Countries Have to Have an Economic Collapse Before Policy Makers Admit They Were Wrong? – You Can’t Count That High

The small country of Portugal has suffered through economic hardships imposed by Europe, and its supposed recovery, or the beginning of a recover or what may be the start of a recovery has been hailed by European policy makers as an example of how their policy works.  Not so fast.

Until recently, Portugal had appeared, at one level, to be successfully executing the euro zone's crisis playbook. From summer 2012 to late May, its bonds strengthened sharply, giving hope that it could wean itself from euro-zone rescue money by next year.

So what is happening now?  Well this.

But the financial-market calm masked economic pain, some brought on by the austerity measures themselves. The economy is projected to contract 2.3% this year, following a fall of 3.2% in 2012. When the bailout was planned two years ago, Portugal had been expected to be growing this year.

The pain has weakened the government, which has gamely tried to carry on with austerity despite deep popular discord. "The muddle-through process in the political system has been invalidated," said Steen Jakobsen, chief economist at Saxo Bank.

The surprise here, no its not the state of Portugal’s economy and political system, that state was easily predictable.  No the surprise is that anyone expected anything different.