Good news

The positive results of the Portuguese main banks on the EU stress tests are very good news.

http://economia.publico.pt/Noticia/banca-portuguesa-passa-nos-testes-e-com-a-melhor-nota-do-sul-da-europa_1448557

Guilty

2 important decisions were known today:

- in Portugal, a group of BCP top executives was considered guilty of market manipulation and providing wrongful information. They were thus sentenced to severe fines (totalling just above €4 million) and a ban from banking activity;

- Goldman Sachs is paying a €425 million fine to close a complaint filled by SEC (American supervision autorithy) for providing incomplete information to its clients. This is the biggest fine ever for a financial institution.

Those are historical decisions, for very similar reasons. The intention to knowingly manipulate the financial markets, harming clients interests. And though historical (its the biggest fine ever in the case of Goldman Sachs; in Portugal, there is a general feeling of impunity on these crimes), I personal have a question. There were hundreds of million of dollars in losses related to these practices, and there is no criminal responsibility? By falling short on this point, I am not sure if we are really preventing a repetition of these practices. And that is a terrible sign to the markets...

- http://economia.publico.pt/Noticia/antigos-altos-quadros-do-bcp-condenados-a-coimas-acima-de-quatro-milhoes_1447350

- http://economia.publico.pt/Noticia/goldman-sachs-paga-multa-de-425-milhoes-de-euros-por-enganar-clientes_1447357

3 top economic news in Portugal on 13 July

- Moody's reviews Portugal's sovereign rating to A1 (so, a two grades downgrade);

- The Ministry of Culture will not have its budget cut in 10%;

- There are over 1.2 million debt actions stuck in court

What a mess...

Straight blow

A 20% straight cut in the wages of all public servants - ministers, members of parliament, gardeners,... all. Ouch! But it is a way, as Mr. Ernâni Lopes was saying. And probably a better and less harmful than the increase in taxes we are seeing...

http://economia.publico.pt/Noticia/ernani-lopes-defende-corte-de-15-a-20-no-salario-dos-funcionarios-publicos_1446422

On Paul Krugman's The third depression

The point is when one starts looking only at the dimension of governmental expenditure and not to the quality of it. Governments should deliver positive expenditure into the economy. That means have the basic current expenditures to ensure an efficient operation of the required services and then investment that generates sustainable growth in the economy. The shift that is nowadays necessary is to turn improductive expenditure into growth generating one - and not spend money just because the simple act of doing it is positive.

And, if you generate growth, than, naturally, your issues on debt weight on your economy will decline, for 2 reasons:
- tax revenue base will increase, meaning an increase on revenue;
- the economy basis against which governmental deficit is measured will increase, meaning the percentual (the meaningful measure) will decline.

http://www.portugalglobal.pt/PT/PortugalNews/Paginas/NewDetail.aspx?newId=%7BCCE8BD75-D9A0-4F9C-9640-2A2D92C0C570%7D