Euro crisis: the view from Portugal

November 14, 2011 9:39:04 PM PST
The president of Portugal is in the Bay Area, trying to get help for his recession-battered country. Portugal is part of the Eurozone and the European debt crisis is inevitably linked to the American economic recovery.

President Anibal Cavaco Silva has been in the United States since last week to boost exports from Portugal. He sees that as the key solution to his country's debt problems.

But one by one, the 27 countries of the European Union are finding their economies linked and a debt crisis in one spreads like a contagion across the continent.

"It's affecting negatively the world economic recovery because of the economic interdependency among countries and among blocs, economic blocs, and because the financial system are now well integrated," Silva said.

But the European economy is part of the global economy, and its weakness will hurt American exports. It can impact the sale of Apple's iPads, even the sale of American fast food burgers.

"Any U.S. corporations that significantly export to Europe could be affected if Europe goes into a deep recession, so yes, definitely, that would include Silicon Valley firms," Stanford University Graduate School of Business Prof. Darrell Duffie said.

The debt crisis in Europe has already created political turmoil in Italy, where long-time Prime Minister Silvio Berlusconi resigned over the weekend.

Greece earlier agreed to austere government spending in exchange for debt restructuring.

Portugal already accepted a $110 billion bailout, but now it has to cut back spending and boost exports.

Portugal's president hopes to take back some of Silicon Valley's entrepreneurial spirit to foster an innovation economy. But that's a longer-term path to economic recovery. And the storm clouds continue to hover over Portugal and the rest of the European Union.


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