Turn back the clock to colonial times? Well, it's an idea

As parts of Europe struggle with their debt, is it time for them to consider joining forces with their former, and now financially-healthy, colonies?

Those wacky jokesters on the Financial Times's Lex team came up with a jolly wheeze last week. The answer to Portugal's financial and economic problems, they suggested, might lie in reuniting the country with its formal colonial dependency, Brazil.

It was a tongue-in-cheek idea, but there is a certain logic. How times have changed since 1822, when Brazil achieved its independence from the Portuguese empire.

Now the former colony is the eighth-largest economy in the world, 10 times bigger than the imperial power that spawned it. Brazil is dynamic and fast-growing, blessed with natural resources, and a member of the Bric club of nations, along with Russia, India and China, that are, apparently, set to rule the world.

Portugal, by contrast, is deeply in trouble within the EU. After Greece and Ireland, it is commonly regarded as the next of the economic "pigs" (Portugal, Ireland, Greece and Spain) that will have to go cap in hand to Brussels for a multibillion-euro bailout.

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The Portuguese, nice people as I recall, with a fondness for the good things in life, will not take too much of that austerity medicine Brussels believes is the only cure for economic malaise. They say they are different to Ireland and Greece as they have a lower government deficit and less of an asset "bubble".

Maybe they're right, but I doubt it will make much difference; in the end, they will have to swallow whatever the EU and the IMF force on them as the price for economic survival.

Unless they suddenly go for the Brazilian option. The signs are not that encouraging, it must be said. As soon as the FT piece appeared, the newspaper was besieged by angry Portuguese readers complaining that the idea of a reunion with Brazil was an outrage, a slur on its nationhood, and an insult to its status as a member of the international brotherhood of nations.

I have seen no reports from Brazil about the idea, but that would be the more interesting reaction. How would they feel in Brasilia about a 10 per cent increase in population and in debt? These individuals would be comparatively well-off - Portugal is still a wealthier country on a per capital basis than Brazil - so they would not be a drain on the Brazilian economy. Increasing public indebtedness by about 10 per cent is easily within Brazil's capabilities.

I think the Brazilians would go for the idea enthusiastically, in much the same way as the old West Germany did not hesitate to bail out its impoverished compatriots in the communist east when the Berlin Wall came down in 1989.

It is not the first time the idea of resurrecting old empires has been suggested since the global financial crisis knocked the foundations of the world economy.

Some British politicians offered Ireland a place back in the sterling-dominated UK last year, when the Republic effectively went bust. But that was a step too far, even for desperate and debt-laden Dublin.

Ireland would rather be part of the EU, a relatively benign financial empire, than one that had been its colonial oppressor for so many centuries.

After that, however, the possibilities are intriguing. What about Mexico and Spain? The Latin American country is on the fringes of the Bric nations, while Spain is the fourth of the European "pigs" deemed on the verge of bankruptcy. Combining the two for the first time since 1821, when Mexico was called New Spain, would create an economic powerhouse the size of the UK, and would probably be welcomed by the US, which would be glad of the chance to hand over the endless problems on its southern borders to somebody else.

And what about Britain and India? Recreating the Raj - although this time with the capital in Delhi rather than London - would meet thunderous opposition in the heartlands of England's home counties. But what an economic giant would also emerge: bigger in GDP terms than Germany, and rivalling China in terms of population.

The British have other options if their economy fails to respond to the prime minister David Cameron's austerity measures.

The US could welcome Britain as its 51st and most populous state, increase its GDP by some 15 per cent at a stroke, and hold off the challenge from China to be the world's premier economic power for a few more years.

But what would the US want with 60 million heavily indebted Brits and the worst economic outlook of the world's leading economies?