Thursday, May 30, 2013

How many more 'terrible years' ahead?

The “two terrible years” anticipated by Pedro Passos Coelho on taking office as Portugal’s Prime Minister on 5th June 2011 are almost up. That will not be the end of it, of course. There is no end in sight to the economic suffering Passos Coelho said the nation would have to endure before returning to growth and regaining the confidence of international investors.
“A very rigorous programme of austerity and structural reforms” was the only remedy, he said while setting about implementing the tough €78bn rescue programme agreed with the European Union and International Monetary Fund.
Passos Coelho won a decisive election victory two years ago. Neither the voters nor economists doubted his commitment to the formidable task ahead. But two years on, what has been achieved?
Unemployment has shot up and is now approaching 18%. Among under 25-year-olds it is 40%. Businesses all across the country have been forced to close. That includes almost half the nation’s restaurants and cafés, according to estimates.
 The Financial Times last weekend highlighted the fact that “austerity is hitting family-run businesses hard, stretching the country’s safety net and threatening social stability.”
 The FT’s correspondent in Lisbon, Peter Wise, wrote:  “Few, if any, crisis-hit European countries have followed the austerity programme more assiduously than Portugal, and the public has largely backed the government’s deep cuts. But recent polls show they have reached their limit and want the programme to be altered, if not scrapped.”
Portugal has not requested any new easing of budget goals set out under its bailout, but its European partners may consider more flexibility if the long recession worsens while reforms remain on track, Reuters reported this week.
On a visit to Lisbon, the chairman of the euro zone finance ministers, Jeroen Dijsselbloem, said it was important for Portugal to stick to its recently revised budget targets and to carry out structural reforms.
“There is a great appreciation in the Eurogroup on how Portugal is tackling challenges, with the economy doing worse than expected. If, on the basis of effort, compliance and reaching structural targets, more time is necessary due to economic setbacks, more time will be considered.”
Passos Coelho’s firm stance is  believed to be helping to rehabilitate Portugal in the eyes of international investors but at home he is facing plummeting popularity in opinion polls, opposition calls for an early election, and more strikes and street protests in the weeks ahead. More alarmingly, the genie is out of the bottle over the euro.
Two years ago, the notion of abandoning the euro single currency was seldom seriously discussed. It is now a hot topic. Lively public debate has been sparked by a new book Why We Should Leave the Euro – an immediate best-seller by a Lisbon economics professor, João Ferreira do Amaral.
The argument in favour boils down to this:  “We are now at a stage where it is becoming clear the austerity policy isn't working despite all our efforts. The next step is for us to realize the euro simply isn't sustainable for Portugal,” according to Ferreira do Amaral.
Whether Portugal leaves the euro may depend on what happens in the next year or two. Passos Coelho says the long-awaited recovery will arrive in 2014.
He underestimated with his prediction of “two terrible years”. If he gets it badly wrong on recovery, Portugal may be going back to the escudo.  


  1. Euro politics seems to be the modern day equivalent of Hans Christian Andersen's "The Emperor's New Clothes". But the original story didn't take years to play out. The idiocy behind the whole plan was pointed out almost immediately, by a child! Why oh why is it taking so long this time round?

  2. Poverty it`s our " natural condition ". Acording to Marcelo Rebelo de Sousa, former PSD president, " corruption is endemic in Portugal and it comes since Afonso Henriques, (1st portuguese king).
    In a country where elites perceive the country as their God given private "fazenda" (farm), not teaching to it`s progeny that opportunism and dishonesty are acceptable outside family environment it`s equivalent to deprive them of means of survival.
    Portugal is unable to generate change. Changes are mostly the result of imported ideas.
    In 1900 Sweeden had one per cent of illiterate, Portugal 30 years later had still beetween 80 and 75%, (depending on the author).
    The portuguese caste system does not grant a human quality to the poor. In my opinion it`s the result of the high jewish and arab origin of portuguese people wich potentiated the results of the roman culture and it`s society model - a laird and slaves.
    According to an historian, 50 years after the discovery of the sea path to India the profit generated by the Indian trade was used to pay interest loans for the importation of luxury goods. Everytime there is money coming in it will be used to relieve the eagerness for status of portuguese elite, allways very poor when compared with their european counterparts wich causes them terribly low self esteem.
    Equality among people is still inly perceived as contra natura by a large number of cityzens. When all Europe has changed than decades later Portugal will change. Well, it has been so untill now. This said I beleive portuguese culture has something to teach - sustainability - traditional cookery and architecture: other europeans cultures, to show off, need much more resources :)