History often does not tell who is right or who is wrong, particularly when it comes to economics - 'though no one will believe it - economics is a technical and difficult subject' - when you mix in politics and ideology as well, the truth is often obscured.

There are people who argue that the New Deal did not help end the Great Depression: 'it was ending anyway' or 'the second world war ended it'.

The Obama stimulus was (a) useless (b) helpful but insufficient (c) just right. Do you think history will reach a consensus on this?

Regarding your 'another viewpoint': Greece has implemented eye-wateringly bitter medicine.

Like medieval doctors, when bleeding fails to cure the patient, they call for more bleeding, blame the patient for not being devout enough, and say that the suffering is a punishment for past crimes.

The fact that bleeding did not manage to kill their other patients clearly demonstrates it was a success, and that Greece is the one at fault, not the doctors.

I think there are plenty of people in Ireland, Portugal and Spain who would argue that the 'bitter EU medicine' worked for them.

Spain has an unemployment rate of 23% for starters.

We should also take a look at Iceland, where going a different route to the EU medicine worked well for them.

That is so true... Few people "working well" in Spain. But TAXES.

Taxes are not particularly high in Spain. They are below OECD average, not to mention below EU or Eurozone average.

http://stats.oecd.org/index.aspx?DataSetCode=REV

In 2013, Spain's tax revenue was 32.6 % of GDP. Compare that to Germany 36.7 %, Netherlands 36.3 % and Finland 44.0 %. Also consider that these as proportion of tax revenue to official GDP, and it's pretty safe to assume that Spain has more in grey economy (not in official statistics) than northern Euro countries.

Spains unemployment rate was 24% in 1994. It was 21% in 1985. Or 18% in 1998. Unemployment in Spain is traditionally 10% above northern countries or the US. So yes unemployment is high (we had a crisis and had a recession!) but not as high as you make it look without context.

Does your first sentence have a typo? It seems to be in tension with your second.

Yes, it could do with a with as in "would argue with that"

"Worked" is still very much arguable: unemployment high and resulting in emigration. Crisis very much not over in Spain.

As a Portuguese, it's far from accepted that it worked well for us.

Of course it worked: nowadays Portugal can borrow money in the free market with interest rates that are historically low, much cheaper than with the IMF. This means: the world trusts again in Portugal.

What you speak about is a completely different thing, Portugal has very old and deep structural problems but they were not caused by this particular crisis, they just got more exposed. Solving them is another story, I don't even think that our democracy (as we know it) is able to do it.

Can we borrow because the world trusts us, or because the world trusts that we'll get bailed out again if we default?

The world trusts that they will receive the money that they lend to us. The lender doesn't care from where that money comes.

In the end we arrive to the same conclusion, EU/IMF/whatever trust Portugal enough to bail us out again.

But I understand where you want to get: "we are behaving like good boys" and making everything that "Germany" says. Would you prefer an atitude like the Greek one, "acting like a spoiled kid"? As Greece, we are a small and periferical country without any power to negotiate by ourselves - we need to associate with others - and sincerely I prefer Portugal to associate with Germany than Greece. Our best way to get through this is by being "the good boys" and man up.

That's not where I want to get; I don't care about such petty considerations, nor do I agree with any of those characterizations. If it's better for us to strictly comply with the guidelines set by the lenders, I'm fine with that.

I'm simply skeptical that any of those parties (private lenders or EC/IMF/ECB) lend us money because they trust us to pay it back, and so I have to wonder why else would they lend us money.

Borrowing rates are historically low most other places as well.

Regarding 'trust' in Portugal: Draghi's 'whatever it takes' statement and actions are mainly what fixed this.

You need to be careful about definitively attributing an outcome to a particular action - hey, maybe you fixed borrowing costs by eating weetabix for breakfast one day in 2010, and now Portugal has low borrowing rates.

We are also of course only considering one very limited measure of 'success' - you did not mention unemployment or GDP, for some reason ...

> Regarding 'trust' in Portugal: Draghi's 'whatever it takes' statement and actions are mainly what fixed this.

> maybe you fixed borrowing costs by eating weetabix for breakfast one day in 2010, and now Portugal has low borrowing rates.

Portugal has low borrowing rates because it didn't break promises and contracts. This allowed Portugal to be trusted again, not Draghi's statements. If so they would have worked with Greece also..

'Trust, not money, is the currency of business and life.' - David Horsager

The ECB buying government debt, and pledging to buy as much as was needed, wasn't the main cause then?

Global interest rates being historically low isn't a cause now?

No, you say, it is because of something that was the same before, during, and after the main crisis point - that promises and contracts were not broken. (Not that promises or contracts need necessarily have been broken had other courses of action been taken).

Meanwhile e.g. Germany, who broke the rules on borrowing early in the life of the Euro, has of course suffered economic collapse, and cannot borrow money at any interest rate. And Iceland, they are back in the stone age now.

Global interest rates are low, and they are approximately the level at which Portugal can borrow, because there is some trust that it behaves normally.

If Portugal behaved like Greece, it couldn't borrow at those rates from the market. Greece can't, without others underwriting the debts.

Compare Greece: http://www.tradingeconomics.com/greece/government-bond-yield

to Portugal:http://www.tradingeconomics.com/portugal/government-bond-yie...

Notice how the figures have same form, but quite different scales.

In this sub-thread, we were debating whether austerity in Portugal was a success.

The best comparison would be to Portugal had it and the EU/ECB adopted different policies. Admittedly this is hard since we do not see that.

You are choosing to compare Portugal to Greece. Greece alas is a complete basket-case. Starting in a much better situation than Greece, and claiming success for policies that leave you less worse off than Greece, is a very low bar.

At the same time, you argue that we can never compare Portugal to Iceland - not even as a counterexample to 'a country must not break promises or contracts, otherwise the economy goes down the drain'.

Iceland is not a very useful counterexample for "a country must not break promises" - or more precisely, "is it not wise for a country to break trust in its policies" - because I can't see what promises Iceland would have broken.

Why the Iceland case is different - and Iceland has not lost serious trust in eyes of lenders - is that Iceland did not run a serious public deficit and it did not fill such a deficit by borrowing.

Still, the economic crisis brought a shock to Icelandic economy in form of huge devaluation. If Portugal would have gone from EUR to its own currency, how much would it have devalued?

ISK halved its value practically overnight: http://www.tradingeconomics.com/embed/?s=usdisk&d1=20050101&...

As an anecdote, according the same source, Portugal nowadays can even borrow (Government Bond 10Y) at a lower interest rate than US.. (1,72% vs 1,90%)

We can never compare Portugal with Iceland. As an objective example:

Portugal needs energy from the exterior to survive. Would anybody trust us enough to sell energy (at a reasonable price), not knowing if we would pay it [1]? By the other hand, Iceland doesnt't need the exterior as much as we, they can afford to not be trusted [2].

[1] Or we could associate to Russia, like Syriza tried..

[2] 'By harnessing the abundant hydroelectric and geothermal power sources, Iceland's renewable energy industry provides close to 85% of all the nation's primary energy - proportionally more than any other country - with 99.9% of Iceland's electricity being generated from renewables.'

http://en.wikipedia.org/wiki/Economy_of_Iceland

Agreed, the Iceland comparison is a red herring that is repeated often but which completely bypasses how different the Iceland economic crisis was.

Iceland never had much deficit. It has a healthy public economy. Iceland had a boom of financial industry which then went bust, but it wasn't a significant part of the country's real economy.

When the banks went bust, foreign customers who lost money in the crash insisted that Iceland, the country, should compensate. The government felt they didn't, because it was not the Icelandic government that was in bankruptcy. And that was fine.

The public deficit in Greece (and, to lesser extent, Portugal, Ireland, France, Italy and now Finland) is a very different problem.

I must add that I disagree about Iceland not needing the exterior. Iceland is a very, very small country on a remote, barren island with few natural resources, and is hugely dependent on imports to make it livable in the modern sense. Iceland definitely needs trade with the exterior to survive. I would say Greece is more self-sufficient for many important things (like food) though not for geothermal energy.

Or maybe Greece condition is worse and the side-effects of that pill would kill it anyway, and Greek government suspects it and tries to try other alternatives first.