A ray of light in the gloom...

The news from The Euro Zone is not good this week, to say the very least.

An estimated 100,000 people took part in the march in central Athens to protest austerity measures being pushed through by the government and sadly three people died in the ensuing mayhem. The measures were instituted at the insistence of the EU and the IMF (International Monetary Fund) and it looks as though Portugal and Spain may follow hard on Greece’s heels…with many wondering whether the UK will face similar problems.

Moody’s, the international rating agency, warned on Wednesday it may downgrade Portugal’s government bonds in the next three months because of deteriorating public finances and “long-term growth challenges”. The warning came as the Lisbon Stock Market fell for a second consecutive day and the cost of government borrowing rose amid market fears that the Greek debt crisis could spread to Portugal and Spain.

The Portuguese government has promised that it would immediately implement austerity measures initially planned for 2011-2013 in response to “speculative attacks against Portugal’s sovereign debt.” The measures are part of a stability and growth programme that aims to cut the budget deficit from 9.4 per cent of gross domestic product in 2009 to 2.8 per cent in 2013.

Portugal's great weakness, however, remains its slow growth as competition from elsewhere in the world makes their traditional industries redundant. Factories have closed while new industries, such as renewable energy, have not yet been set in operation. Unemployment is at 9.7 %, lower than Spain, but unlike Spain, Portugal failed to create growth or get its public finances under proper control after it joined the euro in 1999.

The Government has however decided to work with the opposition party in an attempt to persuade the markets that Portugal is serious about controlling its deficit. Measures already announced include higher taxes for the rich, rising from 42 to 45%, and later retirement for civil servants, where retirement age has now been set at 65 instead of 62 ½ - strange to set it the extra half isn’t it? Public sector workers in hospitals, schools and courts went on strike last month to complain about this change…

It does seem that there is a singular lack of forethought as to how strike action and protest marches will effect the economy – mind you, I suppose the same could be said about the BA strikes at a time when BA is struggling to keep afloat. Add to this the natural disaster of volcanic ash making tourists wary of travelling to Europe and it really does seem a recipe for financial disaster as it may well put holiday makers off.

All this would seem to be unremittingly gloomy, but interestingly enough, if you are in the process of buying property abroad right now it may not be.

On Wednesday sterling hit €1.16/£1 against the euro. If there is one single thing that you can do right now to protect yourself, it is to sign up with a reputable currency company like Smart Currency and consider ‘forward buying’ your currency. As Smart mentioned in an email sent out to all clients, and I quote: ” Even though the European Central Bank and the IMF say they have agreed a debt rescue package for the Greeks the markets remain unconvinced. And problems are spreading to other European countries such as Spain and Portugal, whose debts are much greater than the Greeks.”

You can buy currency at today’s rate for up to a year in the future. This means effectively that you will know in advance exactly how much your currency transfers will cost you. You will not have to be in the hands of whatever financial disaster may arise, and that includes any problems that may hit the UK. Frankly, the wisest course of action would be to pick up the phone and have a chat to a currency expert about this. Right now! Go to www.smartcurrencyexchange.com

Let me know how your plans to visit or buy in Portugal are going. I am planning a visit in August and I can’t wait! Any ideas out there – what’s your favourite place? I’m toying with the idea of Lisbon which, believe it or not, I have never visited!

Take care…bye for now!

Carol.
www.portugalbuyingguide.com