Wednesday, April 24, 2013

25th April 1974 - then and now

The revolution of 25th April 1974 transformed the political and social set-up and gave great hope to the people of Portugal. Thirty-nine years on, hope is in short supply. It has evaporated in the face of the intractable economic crisis. What has gone wrong?
During the decade before 1974, the country was still relatively underdeveloped with poor infrastructures and inefficient agriculture, but growth rates for GDP were among the highest in Europe. By 1973, the on-going colonial wars were exacting a heavy toll in terms of financial cost and in promoting mass emigration among the better educated and most technically skilled who wanted to avoid conscription.
 The ‘Carnation Revolution’ replaced dictatorship with democracy. It also led to a succession of economically inept governments and a litany of mismanagement, corruption and greed that has brought the country to the edge of bankruptcy.
In the aftermath of the military coup, the nationalisation of banks and industries and the expropriation of agricultural estates led to collapse across all sectors of the economy.
The 1980s saw a return to economic and social stability of sorts. After joining the European Union in 1986, trade ties increased, structural and cohesion funds flowed in, and tourism took over from farming and fishing as the main economic activity in the south of the country.
Living standards continued to rise and prosperity spread among an expanding middle class in the 1990s. On 1st January 2001, Portugal adopted the euro. In the five years that followed, household debt expanded, unemployment increased and GDP growth dropped to the lowest of any country on the continent.
At the beginning of 2010, Portugal joined Italy, Ireland, Greece and Spain in a full-blown debt crisis that the Socialist government of José Sócrates was unable to bring under control. One of its last acts in 2011 was to apply for a bailout from the International Monetary Fund and the European Union.
As the centre-right government of Pedro Passos Coelho struggles to repay the €78 billion bailout, a need for a second mega loan may be looming. Some analysts insist Passos Coelho has lost his way in a mission impossible - that the debt burden is such that Portugal will never be able to pay it off. If that is the case, what is point of trying?
Among those who hold that opinion is Mário Soares, an arch critic of the dictatorship who rose to prominence immediately after the revolution. The former Socialist leader and now elder statesman said recently in a radio interview: “No matter how much [the government] impoverishes people or steals from their pensions, the state will never be able to pay back what it owes. When you can’t pay, the only solution is not to pay.”
He is urging all left-of-centre political forces to bring down the present government and repudiate the austerity measures demanded by the IMF-EU troika of lenders. 
Before the Carnation Revolution, people all across the country were restive and hungry for change. They are again. Contempt for authority is being fuelled by the collapse of many businesses, rising costs and austerity measures that are impacting on education, employment and health, causing widespread suffering, especially among young families, the elderly and the poor.
Proposals for even more severe austerity are infuriating vociferous opponents who increasingly see the present government as taking on the mantle of a dictatorship.
Portugal could be on the verge of another pivotal transition. It is unlikely to be as dramatic as a military coup. It is the people not the army who are in the forefront of the demand for change this time.
Amid the current paucity of hope, street protests in what is being described as a “historic day of struggle” are planned for May 1. 

1 comment:

  1. I have been an advocate of a default for some time, well before Soares came up with the idea and certainly well ahead of Portugal having accepted around €80 billion which it is unlikely to be able to repay or worse, service as debt. Not only are there historical precedents where default has worked well (Germany after the War and more recently Argentina, and even Iceland) but Portugal has been unable to implement a policy of fair ‘rescue’ (why tackle BPN and even BANIF with public monies?) such as that implemented in Sweden, Japan and the UK, which sees realistic returns on public bailout monies provided to banks.

    We have no hope here as no one appears to have the expertise to manage the situation and bank directors continue to act and pay themselves like private board members whereas many are in effect public servants as a result of bail-out money. My view is that we may even be too late on defaulting, because the EU is a fortress which blocks any deviation from the mean. The unreasonable amounts of money poured into a Greek economy which is totally bankrupt (as is Portugal, to a large degree) is a demonstration of the lengths to which the EU is prepared to go to protect its status and symbols (including the Euro).

    Don’t get me wrong: I am not an apologist of/for chaos, especially financial chaos, but I think that what we need in Portugal is investment, and to make the investment proposition attractive, purchasing things here needs to be cheap to foreigners. One way to do this: devalue the currency. Of course, in the EU, we cannot but if we pulled out of the currency, that would be possible. I advocate a complete break from the currency mechanism, while maintaining the rights contained within the EU treaty i.e. economic, free movement of labour, etc. This would put us in the same category as the UK (not that I am comparing the sizes of the economies), and we would then look to ex-Palops, India and China to fill the funding gaps which would inevitably arise.

    If Portugal had been the first of the nations to ask for a bail-out (and Sócrates had swallowed his pride and been truthful with the nation from the outset) my view is that we would have been much better off (one has only to look at the better terms, such as interest rate, which Greece received).

    The sacrifice involved in a default is that for everyone who intends to move, take holidays abroad, etc, the shock would be huge, but for anyone who lives, works and has their life completely in Portugal, the change would be less drastic (although prices would increase in real terms as the cost of imports would have to be factored into the equation). The fact that we are not self-sufficient in energy and also have decimated our agricultural and fishery productive bases, is also a debilitating factor. However, at least the baseline would be zero. I estimate the current working generation would be lost, but at the moment, I feel that is the case anyway, with future generations also compromised. One has only to look across the border at latest unemployment statistics to see what awaits Portugal if it does not quickly find a way to rein in its debt and cancel its unrealistic commitments.

    Look at it this way: hundreds of developers are going bust and defaulting on creditor payments - with no recourse for those very same creditors. An economy is similar - to some degree...