hitting hard

It was the worst first week ever on Wall Street. Most stock market indexes fell by more than 5% . The market is now discounting a recession and the permanence of the subprime credit crisis for some time to come. Presidential elections later in the year are adding to uncertainty.

With more than 20% of its external trade done with the US - the strongest bilateral trading relationship in the World - the European Union will not stay immune. Further, the sub-prime credit crunch has now reached continental Europe at full steam. Since just before Christmas, the European Central Bank has injected about 400 billion euros in the euro-zone banking system. To compound the difficulties, the euro is approaching again record levels against the US dollar.

The barrel of crude oil is flirting with the $100 mark and it seems a matter of time until it settles confortably above it. The price of gold, an ever accurate gauge in times of uncertainty, has this week surpassed its historical high set in the early eighties.

For the Portuguese economy these are all bad news. After a full decade of anemic growth and failed reforms, the credit crunch is now hitting hard the country, leaving the economy in a fragile condition to stand the effects of a full blown recession in the US and the EU. With about one third of its GDP being exported and almost 80% of its external trade done with the EU, Portuguese economic growth might turn negative this year for the first time since 1984.