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Portugal is becoming the new sick man of Europe, despite sticking to the troika’s hard-to-swallow medicine of austerity, while the prognosis for Greece is much worse- and potentially contagious- according to the latest report from Citi.
The markets’ focus should be firmly on Greece — and Portugal’s — immediate economic future , according to the research by economists in the bank’s global research group.
According to Citi, Portugal’s economy is shrinking and, like Greece, it will “probably require an extension of its bailout package despite the fact that the government has dutifully reduced its expenditure and diligently implemented most of the measures mandated under the Troika program.”
The report notes, however, that unlike Greece which could leave the euro “as early as September ”, the prospect of a Portugal exit is slim. Rather, Portugal could face a flight of bank deposits and a reduction in consumer confidence, trade and foreign investment because of a Greek exit.
“In our base case scenario, we expect that Portugal will remain a member of EMU, in contrast to Greece, for which we see a 90% probability that it exits the euro area,” the report states.
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