Portuguese government debt (Maastricht debt) keeps riding significantly ahead of Portugal's GDP, especially since June 2011, when right-wing Coelho took office as Prime Minister — to be fair, socialist Costa did not perform much better since he took over on November 2015, although the situation shows some slack in the recent few months. The debt upward trend contrasts gloomily with the flat trend of the GDP (trends are given by the dotted regression lines in the chart).
Government debt is not inherently bad, but it may be a curse under some circumstances. Similar in this respect to private debt, government debt may dissolve all by itself if inflation runs into higher gear. Unfortunately for Portuguese finance's managers, inflation has been and will likely remain inconsequential for yet some time. Debt may also remain a lesser evil if income (fiscal income generated by a swelling GDP) grows at a fast pace. However, if and when debt runs far ahead of GDP, the amount of work and wealth that the nation has to put aside to pay for interest on the debt becomes an overburden, diverting resources from other more advantageous uses: well-being, education, infrastructure, social solidarity, employment, etc. In the case of Portugal, not only debt runs far ahead of GDP, but it also runs quite faster (the slope of the debt regression line is 1,112, against -0.1 for GDP, for the period covered in the chart), meaning that a chunkier slice of wealth is being allocated to interest remuneration and loan payback, in pure waste for the nation. Quite a dismal scenario. Government cash-flows will be hard pressed to sustain the current set-up for much longer.
Another issue is the usage made of the debt. The general rule should be to use debt to finance activity whose rate of return is greater than the interest rate to be paid to debt holders. In the case of Portugal, and in a context of low inflation, this has not been the case, with the result that the growing debt has been inducing nothing but further belt-tightening and overspread impoverishment.
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