The recent macroeconomic developments of Portuguese and European economies

Since 1990, the European economy has experienced strong instability. To analyze this trend, we must take into account the fluctuations of the main economic indicators. During this analysis, we will take into account the group of countries called "PIGS”. It means Portugal, Spain, Italy and Greece. These countries have faced a strong recession during these last years, which impacted their economic indicators.

The first topic to be analyzed is the unemployment situation in the concerned countries.

In February 2012, the unemployment rate in the euro area reached 10.8 %, the highest for 25 years. The increase is also very high in recent months, rising by 0.5 % during the last six months. The countries of the euro area accounting for larger amounts of unemployed people are Spain (nearly 5.5 million), followed by France (2.9 million), Germany (2.4 million) and Italy (2.4 million).

Much of the sharp rise in unemployment in the whole area in September was due to Spain, which contributes to a third of the total (34%). Other countries in economic difficulties also contributed significantly: Italy provided 23% of the total; about 19% in Greece; and Portugal nearly 12%.

This table below shows us the evolution of the unemployment rate of the main countries in 2012:          

- Italy: 8.6% (Sept); 8.5 % (Oct); 8.8 % (Nov); 8.9 % (Dec); 9.1 % (Jan); 9.3 % (Feb).

- Spain: 22.4 % (Sept);  22.7 % (Oct); 22.9 % (Nov); 23.0 % (Dec); 23.3 % (Jan); 23.6 % (Feb). 

- Portugal: 13.0 % (Sept); 13.6 % (Oct); 14.0 % (Nov); 14.6 % (Dec); 14.8 % (Jan); 15.0 % (Feb).

- Greece: 19.0 % (Sept); 19.7 % (Oct); 20.6 % (Nov); 21.0 % (Dec).  

After seeing the evolution of unemployment rate, let’s move on to the public deficit and public debt.

The operation of automatic stabilizers and the implementation of fiscal policies to support the activity led to a massive deterioration of public accounts of the countries of the Economic and Monetary Union. Overall, for the euro area, between 2008 and 2009 the government deficit increased from 2% to 6.3 %. The public debt grew by 69.8 % to 79.2% of GDP in the area.

 Evolution of public deficits in the euro area (% of GDP):

 - Spain: 1.9 (2007); -4.2 (2008); -11.1 (2009).

 - Greece: -6.4 (2007); -9.4 (2008); -15.4 (2009).

 - Italy: -1.5 (2007); -2.7 (2008); -5.3 (2009).

 - Portugal: -2.8 (2007); -2.9 (2008); -9.3 (2009).

For many countries, government deficits are not only excessive but highly exceed the criteria of the Maastricht Treaty, accepting an upper limit of 3 % of GDP.

 Evolution of public debt in the euro area (% of GDP):

- Spain: 36.1 (2007); 39.8 (2008); 53.2 (2009).

- Greece: 105.0 (2007); 110.3 (2008); 126.8 (2009).

- Italy: 103.6 (2007); 106.3 (2008); 116.0 (2009).

- Portugal: 62.7 (2007); 65.3 (2008); 76.1 (2009).

The table above regarding the public debt of the four countries shows that Spain respects the criteria of 60% of GDP, but still have a strong  increase. The other countries are in a critical situation, with a rate which exceeds sometime twice the Maastricht criteria (Greece, in 2009, reached 126.8 %).

Moving on to the last point, which is the rate of growth in the recent years of the countries.

 Evolution of the growth rate of real GDP in the euro area in %:

 - Spain: 3.6 (2007); 0.9 (2008); -3.7 (2009).

 - Greece: 4.5 (2007); 2.0 (2008); -2.0 (2009).

 - Italy: 1.5 (2007); -1.3 (2008); -5.0 (2009).

 - Portugal: 2.4 (2007); 0.0 (2008); -2.6 (2009).

 About the growth rate, each country has positive and satisfactory rate. However since the economic crisis of 2008, the growth rate began to drop and reached negative rates, like Italy, which saw its rate fell to -5.0%.

To conclude, the most affected countries by the economic crisis are countries of the south Europe. This situation is very worrying because it persists for several years and the fiscal and monetary policy appear  to be ineffective.

Seb Rizzi 

[artigo de opinião produzido no âmbito da unidade curricular “Economia Portuguesa e Europeia” do 3º ano do curso de Economia (1º ciclo) da EEG/UMinho]