PRIVATE HOUSEHOLD debt in Portugal has shot up by six per cent, according to the latest figures from the Bank of Portugal. In practice, it means that in 2004 Portuguese debt represented on average 117 per cent of total family income, rising 123 per cent on the previous year.
The maximum credit debt advised by most banks within the European Union stands at 40 per cent of total income. The Portuguese are, therefore, spending a total of 83 per cent more on average than their wallets should allow.
The precarious state of the nation’s finances market does not seem to be influencing people in cutting back on expenditure, with the blame being laid at the door of cheap credit, encouraged by low interest rates.
But it isn’t just families that are up to their eyes in debt in Portugal. By the end of the year, the Portuguese State is expected to have a budget deficit of six per cent – three per cent above the limit laid down by the European Union. And the national public debt is set to be 65 per cent of the country’s GNP by the end of 2005. Put another way, it means that the economy grew by only 0.3 per cent.
Portugal’s difficult economic recovery is being hampered by high world oil prices, a Europe-wide economic recession hitting both France and Germany, traditional importers of Portuguese products, and fierce competition from Eastern European economies and those in other countries, such as India and China where wages and production costs are lower.
However, the Portuguese Finance Minister, Teixeira dos Santos, has played down the recession in Portugal by saying that it was important to realise that the country was not officially in the grip of a recession. “We have to understand that forecasts are exactly that and are not precise scientific-economic facts,” he said.