# Portugal's 2011 Budget



## nandnjudge2 (Oct 5, 2008)

On a more serious note, important news was announced in Portugal this week that could effect all expats that live in Portugal

While we sit in the comfort of our secure homes sipping cups of tea or glasses of wine watching Premier League football with not are care in the world as to what is happening in the real world outside, spare a thought for the people that are going to be hit again in Portugal with the next lot of substantial cutbacks following the implementation of the new 2011 budget. The article on
Portugal: General strike announced for the 24th of November | socialistworld.net
makes very sober reading looking at things from the workers perceptive.

If the 2011 budget does not produce the desired result of reducing the deficit from 9% to 4.5% by the year 2012 I ask two questions :

Question One

What effect will the 2011 budget and future additional cutbacks have on the expatriates that reside in Portugal

Question Two 

Are we about to witness important changes that will bring about social changes to the well being and fabric of Portugal as we know it now


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## scotcheddiemarble (Jul 27, 2010)

This is the kind of post,in which i find this forum really helpful.That members can ask questions which,with answers, will assist people who have a keen intrest of what is going on in Portugal.You can never get enough of relevant information,so if members can give updates on the budget and express the facts,then i am sure it will be much appreciated.There are very valid points raised.


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## nandnjudge2 (Oct 5, 2008)

Hi there thank you for those kind few words

You may be interested to know that I posted the same thread on four different Expat forums at the same time here are the results

THIS FORUM 1 replies and 164 views

FORUM TWO 0 replies and 25 Views

FORUM THREE 1 replies and 116 views

FORUM FOUR 38 replies and 805 Views

One interesting thing came out , refer 


IMF admits that the West is stuck in near depression - Telegraph

VERY THOUGHT PROVOKING BUT DEPRESSING READING , LETS HOPE IT IS A WORST CASE SCENARIO


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## robc (Jul 17, 2008)

nandnjudge2 said:


> Hi there thank you for those kind few words
> 
> 
> IMF admits that the West is stuck in near depression - Telegraph
> ...


I would be inclined to suspend hope at this point and start looking at practical alternatives..........look at the current record breaking Gold Prices for example. This is going to be a double dip recession with the second dip forcing some countries in to depression. Japan has just cut interest rates to 0% in an attempt to stimulate spending and growth. Sadly it seems that we in the "west" panicked by a few dodgy banks threw our all in attempting to prevent the unpreventable. Looks like we are all going to pay now !!


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## silvers (Sep 22, 2008)

So the Torygraph tell us that Europe is screwed? Would they care to explain why the GBP is in the toilet then? Or why the GBP is still losing ground to the Euro? It's like watching Paul Daniels misdirections.


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## miradouro (Jan 19, 2010)

*What effect will the 2011 budget and future additional cutbacks have on the expatriates that reside in Portugal?*

-- First of all, VAT rates are about to rise in January, so everything becomes more expensive. For expatriates, this will probably mean we shop around and source goods more online (on ebay/amazon) than we do already.

-- *Mortgage rates*: Given the enormous exposure of Portuguese (and other PIGS) private lenders (in Portugal, this is scarier even than the public sector deficit!), the Euribor is likely to be kept artificially low. Any shift upwards to, say, a level over 2.5-3.5% is likely to lead to widescale defaults and enormous hardship across the PIGS. 

This could be good news for expats with stable income who pay a low mortgage spread. But in the overall context (negative equity, credit crunch) if your principal is worth more than your house, if you want to sell your house, or if you need to release your paid-off property capital, things are not looking rosy. 

The big driver of the expat property market in Portugal has now stalled -- the 2000-2008 era, marked by rapid property capital accrual in the UK, Netherlands, Belgium etc. plus the ease of equity release/second mortgages. With a lack of imported wealth on the part of buyers, house prices for expat property are likely to drop by 30-50%. 

Domestically, bank lending to middle-class Portuguese is already close to frozen (or quoted qt large spreads), plus house valuations by banks for mortgages are currently being understated by 30-50%. Worse, rumour has it that the foreign banks -- i.e. Barclays and Deutsche -- are thinking of breaking ranks over calling in bad debts. Apparently, the Portuguese banks, under pressure from the government, have been taking a softly-softly approach on repossessions during the crisis, so as not to deflate the market. If the foreign banks bolt on this, there could be a sudden wave of repos hitting the auction market. A recent Visao article suggested discounts of well over 50% on the empty new-build apartment blocks/condos on the edges of Lisbon and Porto. 

-- *Rents*: Generally, rents should be highly negotiable in this market. However, the fact that Portuguese can't borrow money to buy means that rents are acually going up in some sought-after areas. 

-- Expat-run tourist businesses in Portugal are likely to need to lower prices. There is already considerable loss-leading occupancy-chasing from the big hotel chains (bargain rates of 30-50 euros per double in Lisbon), and so small-scale businesses will need to be creative. This is good for expat consumers (those seeking cheap weekends away) but bad for expat suppliers (B+B owners).

-- *Cost of living, overheads*. Companies with strong leverage in the Portuguese market, i.e. the monopolies (electricity, water) and oligopolioes (TV, Internet, phone, fuel/petrol), are likely to squeeze every cent from their (protected) market -- Portugal -- to defend their positions in markets abroad where they must compete. Expect price rises on utilities to outstrip inflation.

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My real worry is if capital markets really go all-out on undermining the PIGS, Portugal in particular. In the long term, all this might make the Portuguese become less bureaucratic and EU-dependent, and more focused on building skills and hard work, but there will be difficult years. Plus, most likely, heavy emigration: talent will move to where it can earn the best living.


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## robc (Jul 17, 2008)

miradouro said:


> *What effect will the 2011 budget and future additional cutbacks have on the expatriates that reside in Portugal?*
> 
> 
> ------------------------------
> My real worry is if capital markets really go all-out on undermining the PIGS, Portugal in particular. In the long term, all this might make the Portuguese become less bureaucratic and EU-dependent, and more focused on building skills and hard work, but there will be difficult years. Plus, most likely, heavy emigration: talent will move to where it can earn the best living.


I agree with all that you say here..............given the frailty of the PIIGS economies, were one to break ranks and leave the Euro fold ( as seems likely)what impact would this have on debt scaling and deflation in Portugal?


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## silvers (Sep 22, 2008)

To give you some idea and inflation notwithstanding, in 2001 a pack of 20 cigs here cost the equivalent of £1, now they cost around £3.10. If this were reproduced today, if the Escudo was re-introduced, the £ could be worth between 60-70% more than it is against the Euro.
Bad side, your home would be worth less in £ terms.
Good side, pensions received in Sterling, would allow you to live quite comfortably.


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## nandnjudge2 (Oct 5, 2008)

My real worry is if capital markets really go all-out on undermining the PIGS, Portugal in particular. In the long term, all this might make the Portuguese become less bureaucratic and EU-dependent, and more focused on building skills and hard work, but there will be difficult years. Plus, most likely, heavy emigration: talent will move to where it can earn the best living.[/QUOTE]

Your reply is well documented, you obviously keep your eyes and ears to the ground.

On of my biggest concerns is that in addition to the capital markets undermining the PIGS I fear a bigger threat is that the rich Euros countries of the north will eventually loose their patience propping up the PIGS which are holding them back when it come to monetary policy and move towards a two tier Europe, in effect giving them, letting them sink or swim and all the indications are they would sink.

I do not think that we anyway near the bottom of the graph, the government of the PIGS are left with little room to maneuver should their 2011 budgets fail to meet expectations.


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