European Bailout Loan Terms Eased

European finance ministers announced a seven-year extension to the average maturity for bailout loans given to Portugal and Ireland. The concessions come as the two countries are fighting to improve their fiscal situations by implementing harsh austerity plans. These austerity measures have cut growth more than expected, causing the need for more lenient terms on existing loans. While a loan extension will help close annual budget gaps, more struggles remain. Portugal, in particular, is facing a far deeper recession than many officials were expecting, and lawmakers have recently voted down planned austerity measures aimed at improving the country’s long-term outlook. Coming into 2013, we posed the question of how European citizens would handle the deep budget cuts being implemented, and whether the bailout programs would work in an environment of social unrest. It appears that many Europeans are unwilling to accept the cuts being forced on them. The Netherlands (traditionally a deficit ‘hawk’) announced it would be “taking a breather” from austerity as the country deals with weaker growth prospects. Cyprus, fresh off a massive banking bailout, is expected to announce its own austerity plans, but officials don’t know how deep the cuts will have to be. In the end, the European sovereign debt story continues to hamper growth in the region, and, in turn, affects growth around the world.