IS PORTUGAL slowly drowning? Ever since the European Union and IMF rode to the rescue with a €78 billion ($ 111 billion) bail-out in 2011, the economy has shrunk, unemployment has soared and thousands of small firms have failed. Joblessness for under-25s is close to 43%, so the educated young are emigrating fast. Every forecast of what Pedro Passos Coelho, the prime minister, warned would be “two terrible years” has been too optimistic. The government has had to amend this year’s budget to hold down its deficit. And the OECD rich-country think-tank predicts further falls in GDP.A decade of stagnation has turned into Portugal’s worst recession for two generations. Many fear that the growth promised in return for austerity and reform is out of reach. “Adjustment is just another way of saying impoverishment, inequality… [and] condemning thousands to unemployment,” José Pacheco Pereira, a critic in Mr Passos Coelho’s own Social Democratic party, wrote last month.Big tax rises and spending cuts have destroyed jobs and companies, yet not done enough for fiscal consolidation. The government says that its creditors may need to show more “flexibility” over next year’s targets,…
The Economist: Europe