The Euro Crisis in Portugal - Essay Example

By the end of the year 2011, after Greece and Portugal, two other countries Italy and Spain were affected by the Euro crisis. By the end of October in the same year, these countries were compelled to pay absolute risk premia on the order of 500 basis points. As a result of this, the public finance structures of both countries became vulnerable as their sustainability became subjected to risk. During the first half of the year 2012, many bonds reached their maturity date in both Italy and Spain. During this phase, there were both positive and negative possibilities – either the debt crisis could be managed in an efficient manner or further severe repercussions on the global economic structure. During the entire course of the European debt crisis, every effort was taken by the policymakers so that they could provide relief to the money market. However, most of the time it was realized that any strategies that were adopted were either too insufficient or too late. In the year 2010, there were many deliberations over the benefits or detriments of monetary assistance or intervention from the International Monetary Fund (IMF). As a result of this, no fixed solution could be found for the euro debt crisis. In July of 2011, a decision was taken to enhance assistance to the Greek sovereign with permission of involvement from the private to some extent. However, this decision was rejected by another decision made in the late October of the same year. This latter decision “required much deeper (50 percent) haircuts for private creditors, supplemented by an announced policy intended to build a firewall through major leveraging of the European Financial Stability Facility (EFSF)” (Cline & Wolff, 2012, p.v). Subsequently, at the beginning of December, the famous summit took place which provided all the member countries of the European Union (EU), except the United Kingdom for its reluctance to participate in the summit, a strong treaty that would tighten the fiscal rules.