Portuguese politicians may thank the Greeks for their quick acceptance of their inability to repay their national debt and their ability to be a distraction to the international community from its analysis of the Portuguese economic woes.

Like Greece, Portugal Has a High Debt-to-GDP Ratio

In 2005, the Portuguese government's debt amounted to €107 billion, which represented only 67.4% of the country's gross domestic product (GDP) according to Eurostat. A decade later, the Portuguese debt swelled to €231 billion in 2015, representing 129% of GDP. During those 10 years, the Greek government's debt rose to €311 billion, an increase of 43% which is far less than the increase of 116% in the Portuguese government's debt. However, both Portugal and Greece have debt-to-GDP ratios that have reached new heights: Portugal's debt-to-GDP ratio almost doubled to 129%, while Greece's increased to 176.9%.

Chronic Youth Unemployment

According to Eurostat, in Portugal and in Greece, the unemployed represented 12.1 and 24.4%, respectively, of the labor force in January 2016. The unemployment rate of the euro area was 10.4% in January 2016; that number is greater than that of the broader EU, which has unemployment of 8.9%. In relation to youth unemployment figures, the Portuguese and Greek woes look even more worrying. In January 2016, the youth unemployment rate reached 30% in Portugal, about 50% more than the EU youth unemployment rate of 19.5%. The figure is an astounding 51.9% in Greece, meaning less than half of people between the ages of 15 and 24 have jobs.

However, the computation of the youth unemployment rate can be misleading because many young people are studying full-time and are, therefore, neither working nor looking for jobs. Since not every young person is in the labor market, the youth unemployment rate does not reflect the proportion of all young adults who are unemployed. Instead, computing youth unemployment ratios instead of youth unemployment rates gives a more accurate picture of the unemployment of those aged between 15 and 24. The youth unemployment ratio has the same numerator as the youth unemployment rate, but the denominator is the total population aged 15 to 24, which makes, by definition, the youth unemployment ratio always smaller than the youth unemployment rate, typically less than half of it. At the end of 2015, the youth unemployment ratio was only 10.7% in Portugal and 12.9% in Greece, which is hardly greater than the 8.8% youth unemployment ratio of the euro area and the 8.4% youth unemployment ratio of the broader EU.

An Inflated Public Sector

In Portugal, after having slightly decreased between 2009 and 2013, the public sector represented 13.9% of the labor force in 2013, even amounting to 16.4% of total employment according to the Organization for Economic Cooperation and Development (OECD). Similarly, in Greece, the public sector represented 17.5% of the labor force in 2013, even amounting to 22.6% of total employment according to the OECD. However, the increase of the public sector in terms of total employment was due to a faster decrease in the total employment as compared to the public sector, thus not indicating real increases in public sector employment.

Honesty Was Not the Best Policy

Which country in Europe could run surpluses sufficient for it to pay its debt out of its tax revenues? The answer is none of them. Portugal's economic indicators may be better than those of Greece, but they still remain in the red. What separates Greece from other European countries, including the troubled and heavily indebted countries of Europe (Portugal, Ireland, Italy, Greece and Spain) PIIGS, or from other countries such as France, the United Kingdom and the United States, whose debt-to-GDP ratios are all in excess of 90%, may be that only the Greeks openly admit that they are unable to repay their debt, while the other foregoing countries remain silent and are not publicly questioned about their will or ability to repay their debts out of tax collections.

It is, therefore, no surprise that the Greek 10-year debt yields more than 10% per annum while these other countries enjoy much lower rates. It is reasonable to expect that the pain would be far too great for the taxpayers of those countries to reimburse their national debts. Greece lost access to the capital markets to finance its debt and paid a heavy price for its candor, but how long can it be before investors lose trust in the ability of Portugal to repay its debt?

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