Portugal and Ireland - Two alike situations or two different stories

First) Economically and financially, The starting point of the two countries was extremely different: Ireland had a Sustainable and Working economy, during the past 10 years and Portugal hadn't.: More specifically: concerning the history of the past budget surplus/deficit's, debt, trade, interest rates, budget revenue in % of the GDP and % of Expenses in the GDP. 

The following information can be built using data available @ the World Bank Website.

Presenting Data:
(to better view the graphic's info, please click on the image to enlarge it)
Ireland is presented with the blue line, and Portugal with the red line.

Budget surplus/deficit

Budget surplus/deficit % of the GDP

Government Debt

Expense % of the GDP

Interest Payment % of the GDP

Revenue % of the GDP

Central Government Debt

External Balance % of the GDP

GDP per capita, PPP

Current account % of the GDP

Resume: Throughout the last 15 years, Ireland had a stable and working economy, with a budget that had room to grow concerning taxes and expenses.

As you can see in all indicators, Ireland has a much better performance than Portugal, throughout the past 15 years, more specifically concerning the management of their Debt, GDP, Revenue in % of the GDP with room to grow, low Expenses rate, accumulated Trade surplus, stable BOP and a positive current account. So, Ireland is in much better shape to support an austerity program because it has room to induce more taxes, with an economy that can support it. Portugal has none of these things.

(The database info used to build this analyse was the World Bank Database:)

Second)

The Problems that originated the crises in these two countries, were also different, and in order for they to be addressed in a proper way, these problems demanded different solutions.

Explaining:

Concerning Ireland the main problems were created by the national housing market bubble and the contagious effect of the USA financial crises, on Irish Private and National Bank's, that lead to an unbalance in the government budget, and also created the need for large amounts of capital to support the nationalization of the private banks and the capitalization of the entire banking sector in Ireland.

In the case of Portugal, the last decades were used to create an unsustainable amount of debt, enlarged every year by budget deficit's, promoting low savings rates across the economy, supported by an economy that was built upon non-traded sectors. These actions have been used systematically, for the past 15 years. Despite lower interest rates promoted by the Euro, and an unprecedented access to very large amounts of credit available on the financial markets, because these economic leverages weren't used in a sustainable way to support the economy, Portugal was in very bad shape when we requested international help.

Graph form the 2011 IMF report

So:

a) With an unbalanced and weak economy;

b) With an already high Revenue in % of the GDP that has no space to grow or to create more taxes, without hurting the economy;

c) With extremely high Expenses in % of the GDP when compared with the other EU countries, and with historical high values in their own budget;

d) With a lower education rate among the working population;

In this scenario, promoting higher corporate and individual taxes, and implementing at the same time, a lower wage / income policy, in an weak economy, without solving the issues presented above, in a short amount of time (3 years) will only serve to harm the few good businesses that the country has and will damage the companies that are already in serious financial troubles.

Graph's form the 2011 IMF report

Portugal needs help in order to Solve the needs of:

1) Fixed Capital (more specifically Capital expenditure) and Working Capital, for exporters and also to all current and valid SME's, in order to: a) Convert their debt into capital, saving costs and freeing companies allowing them to concentrate on their core business b) increasing the investment in fixed capital (machinery, software, hardware..) improving and upgrading the man / hour productivity ratio, and c) Fresh capital will also develop the new projects and ideas that are waiting for funds. With the help of: development banks and funds created specifically for the use of small and medium enterprises and Investment banks promoting the access to international financial markets;
2) Business Venture Capital, helping entrepreneurs to create new business .
3) Reinforcing the stabilization mechanisms for the unemployed (■ professional education in a working environment, converting their education and creating specialized technicians, and, ■ re-enforce the support for the ones that are directly affected by the shift/conversion in the productive platform of the Country, because they will lose their jobs and their business, and they will need specific support programs);
4) Strengthening professional education and post regular school education in order to convert the current workforce towards the new and more productive sectors of the economy.
These actions that will solve the main problems of Portugal, as long as they are incorporated into the Program, and given the necessary funds and regulations, in order to fully and dully implement them in the country.

Graph's form the 2011 IMF report

But these problems remained without being addressed. Because of the way the program was negotiated, these problems were identified, but nothing was done to solve these issues.

As stated and presented above, these problems have already been identified by the IMF

The IMF country report from June, 27, 2011, for Portugal, identified the following problems: Education, Unemployment, Excessive corporate debt, Insufficient corporate capital, and, Low profitability in the trade sectors of the economy, as some of the main problems of the Portuguese economy. But overall, they didn't addressed these problems at the time, neither currently. They (the IMF, the EU and the ECB) aren't doing what is necessary to solve these problems. This is damaging the economy even further, and is creating a disbelieve towards the implementation of the program.

The Conclusion:

About Ireland: the economic history is good and the program is working.

Concerning Portugal: the economic history is bad, the problems were identified but they weren't addressed as they should.

The austerity is needed but the degree (the amount and the strength)  is to high, as i stated before in 2011 and in 2012 (on twitter, G+ and Blogger). We need more time to balance the economy and to build a new and stronger platform in the industry, support the unemployed, provide a change in the professional education of the working population, create the conditions to capitalize the economic viable and productive industries (converting debt into capital), addressing the problems that were known by the IMF but were left unattended, without solutions.

The need for a change in the program is in order, fast.