EU learnt from Greek experience

Sir, Lex on the Portuguese bail-out (May 4) implies that the International Monetary Fund would have imposed more rigorous criteria on the crisis-hit country than the “soft-touch” European Union. This is highly misleading. Were Portugal under an IMF programme, it would indeed be facing demands for thoroughgoing structural reforms and brutal fiscal retrenchment. But, and it’s a very big but, the IMF would be accompanying these demands with one for a huge devaluation of Portugal’s currency. Moreover, the IMF would no doubt be lending to Portugal at a lower rate of interest than under the newly agreed EU/IMF programme.

As a warning of the dangers of unchecked fiscal austerity with no pick-up in exports to offset it, Lex should cast a glance at Greece. Thankfully, the EU has learnt from the Greek experience. The agreement with Portugal shows that the EU no longer believes that fiscal austerity will somehow be expansionary and has agreed (somewhat) more realistic targets with the country than it did with Greece.