Thursday, June 30, 2011

Aliens, doomsday and the debt crisis

This week's news that Russian scientists expect humanity to encounter alien civilisations within the next two decades came at an opportune moment. It seems that nothing short of financial and economic wizards from another planet are capable of sorting out the mess the eurozone now finds itself in.

Astronomers are among the few people on earth capable of grasping the sort of figures politicians are now juggling with. Apparently, the universe has 100 billion galaxies. That's 22 billion galaxies more than the Portuguese bailout - and each galaxy contains hundreds of millions of stars.

The figures make it almost certain that aliens are out there, says Andrei Finkelstein, director of the Russian Academy of Sciences' Applied Astronomy Institute. Speaking at an international forum dedicated to the search for extraterrestrial life, he said we are likely to come into contact with aliens who resemble humans, with two arms, two legs and a head. Unfortunately, he did not speculate on the size of their brain or their business acumen. It seems that when it comes to money matters, however, they could not be less adept than ourselves.

The financial and economic crisis engulfing not just us PIGS, but the whole of Europe, has our politicians in a spin. It also seems to have rendered some of the analysts and commentators dizzy too.
During the street violence in Athens this week, the venerable Wall Street Journal, which has two million readers daily, came out with a headline that read:: “Better Save Some of That Tear Gas for Portugal, Spain, Italy”.

The opening paragraph of the article was similarly flippant: “We’re all mesmerized — though apparently not the least bit bothered — today by the images of rioting in Greece as politicians there struggle to hammer out austerity plans that will get the country its next bit of methadone, er, bailout money.”

It's no laughing matter, and yet you can't stay serious for ever.

Here's the underlying worry, though. If Finkelstein is right, things could get a lot worse than even the Wall Street Journal is suggesting. The British cosmologist Steven Hawking, who agrees with Finkelstein that there are probably intelligent aliens out there, believes that contact with them could be devastating for humanity.

In a TV documentary series last year, Hawking suggested that aliens might simply raid Earth for its resources and then move on. He could almost have been talking about bankers and politicians when he said: “We only have to look at ourselves to see how intelligent life might develop into something we wouldn’t want to meet. I imagine they (aliens) might exist in massive ships, having used up all the resources from their home planet. Such advanced aliens would perhaps become nomads, looking to conquer and colonise whatever planets they can reach.”

Who knows? The Mayan calendar doomsayers who predict the world will come to an end on 12th December next year may be right. In which case, perhaps we in Portugal shouldn't contemplate rioting and risking tear gas, or even waste our time getting into a tizz about more austerity measures. Que será será.  

Tuesday, June 28, 2011

Portugal up-beat over bailout

Portugal's new prime minister, Pedro Passos Coelho, has again expressed his willingness not only to fully abide by the terms of the EU/IMF €78 billion bailout, but go beyond them.

His government has just confirmed that it will be “more ambitious” than strictly required in cutting the country's budget deficit. Its stated intention is to exceed the bailout requirements under which Portugal must cut its budget deficit to 5.9% of gross domestic product this year from more than 9% in 2010.

The government, which only took office last week, has drawn up a four-year programme, but has not yet announced details. Among the most immediate measures will be selling state-owned assets, including the national airline TAP, reducing social security contributions made by companies, making it easier for employers to dismiss workers, and increasing value-added tax on certain products to as much as 25%.

Passos Coelho has said that he wants to go beyond the requirements of the bailout agreement to create “a wave of confidence in the markets.”

The four-year programme announced today will be elaborated upon and discussed in parliament on Thursday and Friday. Meanwhile, Passos Coelho is filling key posts with a surprisingly large number of independents rather than members of his own PSD party or that of his coalition partners, the CDS-PP. Four of his 11-member cabinet are independents. Of the 35 new secretaries of state who take up their posts today, 15 are independents. Only 12 are aligned to one or other of the coalition partners.

This is all in contrast to the confusion and tensions in Greece. While there is much public unease and union opposition in Portugal to the forthcoming austerity measures, there has been far less political wrangling and none of the street violence evident in Athens. Indeed as a measure of the prevailing mood, the hundreds of cyclists who took part in a 'Naked Bike Ride' in Lisbon, part of an international effort to promote environmental issues, abided by a police modesty order. The 'naked' bikers were less revealing than many ordinary holidaymakers on Algarve beaches.

Friday, June 24, 2011

Big week: Finally Friday

It has been a critical week in the political and financial affairs of Portugal and it is ending on a fairly positive note. Both the new prime minister, Pedro Passos Coelho, and former prime minister José Manuel Barroso, now president of the European Commission, are convinced there is broad support among Portuguese people and politicians for the the EU/IMF bailout, despite all its tough reforms and austerity measures.

During the EU summit meeting in Brussels, Barroso noted that "about 85% of the Portuguese people supported the political parties that agreed with the European Commission, the European Central Bank and the International Monetary Fund and agreed on an ambitious and demanding reform program."

Barroso added: "The 'troika' visited Portugal and made contact with the Portuguese authorities and came back with a very positive report. And I hope that spirit and that cooperation will continue in the tasks to come.”

Said Passos Coelho: “Portugal has all the conditions in place to make this program a success." He announced today in Brussels that his coalition government is preparing to accelerate and possibly broaden the austerity measures Portugal has promised in return for a €78 billion bailout. He said he was also considering a swifter reorganisation of loss-making state companies, adding that he would give details of his plans next week.

The prime minister flew to Brussels economy class instead of business or first class. “It's about setting an example, and I'll stick to that,” he said. When asked if travelling economy class would apply to all Portuguese government officials, Passos Coelho said: "Certainly".

The news from Brussels today is not all heartening, of course. While EU leaders reaffirmed their determination to stabilise the euro currency, the likelihood of a Greek debt default remains. Default could seriously undermine confidence in the single currency.

The EU cannot make a decision on the second bailout for Greece and a more immediate injection of €12 billion to stave off insolvency until the Greek parliament votes on a new package of spending cuts and tax hikes. That comes next week. Today, EU leaders unanimously urged all Greek politicians to back the austerity measures.

Thursday, June 23, 2011

Big week: Thursday in Brussels

EU leaders are meeting in Brussels today amid concerns that the fate of the single currency may be in the balance and that Europe may be slipping into the sidelines of globalised affairs. 

"We're at a critical point in the most serious crisis since the Second World War," warned Olli Rehn, the European commissioner for monetary affairs.

German Chancellor Angela Merkel, the most influential figure in the crisis, has expressed confidence that Europe will rise to the challenge.

The situation in Portugal will be discussed in Brussels informally today but the focus will be more on Greece. To secure a second bailout of more than €100 billion and an immediate €12 billion lifeline to avoid insolvency, the Greek government must approve a package of severe spending cuts and national assets sales in the face of fierce public opposition in Athens. Failure could have immense implications for Portugal and other countries within the EU – and perhaps for the euro itself. Today, however, is not decision day on this.

Prime Minister Pedro Passos Coelho yesterday ordered that the tickets for himself and four staff members flying from Lisbon to Brussels today be changed from executive to economy class. Another measure of just how serious the new Portuguese government is taking the crisis is that ministers in the new cabinet have been told their summer break in August will be limited to one week. Members of parliament can only take a fortnight off.

Wednesday, June 22, 2011

Big week: Wednesday in Lisbon

Change is in the air. For the first time in the history of democracy in Portugal, a woman has been elected president of the parliamentary assembly. Maria da Assunção Esteves, 54, formerly a constitutional court judge and member of the European Parliament, now occupies the second highest office in the land after the head of state, President Aníbal Cavaco Silva. Her election yesterday was endorsed by all parties.

With inauguration formalities now behind them, Portugal's new government led by Prime Minister Pedro Passos Coelho today gets down to the immediate challenges of bringing the country's public finances under control.

In his inaugural speech after being sworn in by President Cavaco Silva yesterday, Passos Coelho summarised the government's priorities: stabilising public finances, helping the most needy, making the economy grow and creating employment.

"The goal of returning to a sustainable path in public finances is an urgent imperative to face our short-term problems,” said the prime minister. He promised not to fail.

Replacing the former minority Socialist government that was forced to resign over the bailout issue, Portugal now has a right-of-centre government made up of Social Democrats in coalition with the smaller CDS-PP party, which will govern with a comfortable majority in parliament.

The nicities are over. Now for the tough stuff. The government is expected to swiftly introduce new austerity measures and economic reforms as demanded by the €78 billion bailout.

Dr Richard Wellings, quoted on the PS Public Service Europe website, today offers the following opinion.

It now seems almost certain that Greece will be subject to some kind of second bailout. Attention may then turn to Portugal and Ireland, the other countries being supported by the European Union and the International Monetary Fund. Both still face enormous difficulties, but their circumstances are very different. 
The main problem Portugal faces is long-term economic stagnation. Growth averaged less than 1 per cent in the last decade. Vast EU subsidies have done little to stimulate business activity. Instead, they enriched special interests with close links to the political elite and enabled the government to ramp up welfare spending, which reached a massive 22.5 per cent of GDP in 2007.
Membership of the eurozone exacerbated the problem. Spending could carry on rising without the checks and balances that markets would have imposed in the absence of an implicit EU guarantee of government debt. At the same time, ill-fitting monetary policies created inflation that made Portuguese businesses uncompetitive. Enterprises were also burdened with expensive new regulations, both from the European Commission and domestic policymakers.
Like Greece – and also Spain – Portugal will have to undergo a very severe adjustment to regain its international competitiveness. But such necessary rebalancing will be hampered by these high levels of regulation. In particular, labour market controls make it more difficult to reduce wages, and instead mass unemployment may result.
While Portugal's debts are not particularly high by international standards, the markets lost confidence in the government's ability to undertake the necessary reforms. If economic stagnation continued it would prove extremely difficult for Portugal to cover the interest payments on its debts.
The bailout has staved off the prospect of default for the time being but there must be a serious question mark over whether the new Portuguese government will be able to push through liberalisations radical enough to transform the country's prospects. Worryingly, a second Greek bailout may set a dangerous precedent that makes it even harder to gain political support.


Tuesday, June 21, 2011

Big week: Tuesday in Lisbon

Portugal's new government officially starts running the country today. The new prime minister, Pedro Passos Coelho and his 11-member cabinet will be sworn in by President Aníbal Cavaco Silva.

The government's most pressing task will be to implement the stringent terms of the EU/IMF €78 billion bailout agreement. But even before taking office, Passos Coelho has suffered the embarrassment of parliament rejecting his party's first choice of as leader of the assembly, Fernando Nobre, an independent.

"I am sad that Parliament decided not to take the step to select a true independent to head it," Passos Coelho said yesterday. Parliament will vote on an alternative candidate later today.

A spot of good news: Portugal's budget deficit continued to fall sharply last month from a year ago, according to the ministry of finance in Lisbon. Investors and authorities from the European Union and International Monetary Fund are obviously keeping a close eye on the figures. Last year, the country's deficit was 9.1% of gross domestic product. Under the terms of the EU/IMF bailout, Portugal is committed to cutting its deficit to 5.9% of GDP in 2011, to 4.5% in 2012 and to 3% in 2013.

The news is mostly bad, though. The professional services agency Ernst & Young is describing Portugal’s bailout as “a temporary oxygen balloon” . Other analysts say the €78 billion loan is just a short-term solution to cover upcoming deficit repayments. Portugal’s structural problems (weak competitiveness and low economic growth) remain unaltered.

Like the air temperature in the Algarve, which is forecast to soar in the next couple of days, the political climate in Portugal is about to hot up.

Monday, June 20, 2011

Big week: Monday in Luxembourg

Eurozone finance ministers meeting in Luxembourg have failed to agree on releasing a loan payout to spare Greece from default. There is talk of Portugal being dragged further into the mire because of Greece's problems.

Greece is awaiting €12 billion earmarked for July as part of the country's €110 billion bailout negotiated last year. But Europe's finance ministers are insisting that the Greek government first introduce laws to cut the country's deficit and sell state assets.

This demand comes amid mounting domestic opposition, including a three-day parliamentary debate over a no-confidence vote that could bring down the government of Prime Minister George Papandreou.

Said Luxembourg's Prime Minister Jean-Claude Juncker who is chairing the eurozone meeting: “We forcefully reminded the Greek government that by the end of this month they have to see to it that we are all convinced that all the commitments they made are fulfilled.”

The Greek crisis is expected to dominate the EU summit in Brussels on Thursday and Friday this week. Fear of further contagion remains high. Germany is increasingly seen as the vital bulwark against an uncontrolled spiral of default in Europe.

There is growing speculation in financial circles that the 17-nation eurozone will not be able to survive in its present form. There are suggestions that Greece could be forced to leave as early as 2013. Portugal and Ireland may follow. Of course, at this stage it is only speculation. 

Sunday, June 19, 2011

Big week for Portugal and eurozone

It's the start of another big week in the midst of the current economic and financial crisis. Eurozone finance ministers are meeting in Luxembourg today and tomorrow. Portugal's new cabinet under Prime Minister Pedro Passos Coelho will convene on Tuesday. The prime minister will then attend a key European Union council meeting in Brussels on Thursday and Friday.

The new government here faces the massive initial task of navigating the country through what Coelho has referred to as two “terrible years” of deep recession and record unemployment.

At least the right-of-centre Social Democrats in coalition with the conservative CDS-PP party can look forward to a comfortable overall majority in the 230-member parliament. Coelho has kept to his promise and reduced the cabinet from 16 ministers under the previous Socialist administration to just 11 - four from the PSD, three from the CDS-PP and four independents.

One of the independents is Vítor Gaspar, the new finance minister. An economics professor, Gaspar has worked as a research director at the European Central Bank, led the European Commission's Bureau of Policy Advisers and most recently been a special adviser to Portugal's central bank. He will need all his experience and expertise in the daunting task he has taken on.

The main focus of the new government's work will be administering the tough and broad-ranging conditions of the EU/IMF rescue package, a consequence of a debt that had risen by the end of 2010 to €160 billion and a deficit for the year of 9.1 percent of GDP, more than triple the permissible EU rate first breached by Portugal back in 2002.

The meeting of EU finance ministers in Luxembourg is being dominated by the crisis in Greece, but they will also be taking stock of the Portugal's €78 billion bailout. Economic policy will again be top of the agenda in Brussels on Thursday and Friday. Warning that the ongoing debt crisis could spread to Italy and Belgium, Jean-Claude Juncker, who is chairing the eurozone finance ministers'' meeting, reportedly said yesterday: "We are playing with fire.”

In the light of the acute difficulties in Greece, one commentator said the other day: “Continuing to agree last-minute emergency measures to avoid the immediate collapse of a eurozone country is unlikely to create financial trust. And it is even less likely to create the required political trust to effectively tackle the crisis at its root. The EU heads of government and above all Merkel (the German Chancellor) need to take over the agenda and set out a credible narrative for a sustainable and prosperous eurozone or face the inevitable consequences.”

There has been an upsurge in fears about a possible collapse of the euro. Mind you, there has been talk of that ever since the common currency was introduced more than a decade ago. 

Friday, June 10, 2011

State of the nation on Portugal Day

June 10, Portugal's National Day honouring Luís Camões, who wrote the epic poem Os Lusíadas in celebration of the glorious 15th and 16th century explorations and achievements that brought the country such fame and wealth. How things have changed.

Saved on the verge of bankruptcy by an international bailout, Portugal today is a member of that group of countries humiliatingly referred to by international bond and currency traders as PIGS.

But not much has changed since last Sunday's general election in that the country still does not have a working government to get on with the job of administering the sweeping reforms demanded by the bailout conditions.

Urged by President Aníbal Cavaco Silva to start the process of forming a government as a matter of urgency, the Social Democrat prime minister-in-waiting, Pedro Passos Coelho, got around to opening formal coalition talks with the right-wing CDS-PP party on Wednesday. Even so, it's not expected he will be able to swear in a new cabinet for almost another two weeks. The hope is he will make it before a European Council meeting on June 23-24.  

Tax hikes, spending cuts and structural reforms are expected to follow. So are more job losses, strikes and public demonstrations. Today, a 24-hour strike by the staff of the national rail company has forced the cancellation of all passenger and freight services. 

Meanwhile, noting that money isn't everything, the Paris-based Organization for Economic Cooperation and Development (OECD) has produced a survey suggesting that Portugal has made significant progress over the last few years in improving the living standards of its citizens.

In a 'Better Life Index' survey covering its 34 member states, the OECD places Portugal 9th in terms of the balance between work and private life. In this regard, Portugal is way better off than Britain, for example, but well below Denmark, which always tops these sorts of lists.

In terms of employment, nearly 66% of people aged 15 to 64 in Portugal have a paid job. They work 1,719 hours a year, close to the OECD average. 67% of mothers are employed after their children begin school, suggesting, according to the orgnisation, that women are able to successfully balance family and career.

In terms of the life expectancy (79.3 years), environmental pollution, safety from crime and housing, the Portuguese fair reasonably well, but household earnings are less than the OECD average.

As to the quality of its educational system, the average student scored 489 out of 600 in reading ability according to the latest PISA student-assessment programme, lower than the OECD average. Only 28% of adults aged 25 to 64 have earned the equivalent of a high-school diploma, the lowest rate in the OECD, which stands at 72%.

The sense of community and civic participation in this country is only moderate, with 83% of people believing they know someone they could rely on in a time of need, lower than the OECD average of 91%.  Public trust in government is also low.

Only 36% of Portuguese surveyed said they were satisfied with their life, well below the OECD average of 59%.

Monday, June 6, 2011

Portugal swings to the right and braces itself for increased austerity

The pendulum swung even further to the right than predicted. It was the lowest turnout for the Sociatists of any general election in Portugal since 1987.

The number of abstentions yesterday was greater than the number of people who voted for the winning Social Democratic Party (PSD).

Abstentions totalled more than 40%. With less than 39% of the vote, the centre-right PSD will be able to form a government with an absolute majority in coalition with their traditional partners, the conservative CDS, who finished with nearly 12%.

Former Prime Minister José Sócrates stood down as leader of the Socialists who finished with just 28% having won the previous two elections, in 2005 and 2009.

The PSD leader Pedro Passos Coelho now has the task of overseeing tough, wide-reaching and highly unpopular reforms as laid down by the EU and the IMF in return for a three-year €78 billion bailout. Unpopular with the ordinary people, all the main parties supported the international rescue package.

Lower living standards and even greater hardships in one of western Europe poorest countries are now on their way. Tax hikes and welfare cuts are expected. It will be easier to hire and fire workers. And the EU/IMF are insisting on a raft of other measures which will plunge the country into recession for two years.

The new government has a clear mandate to impose this greater austerity. The Social Democrats will have 105 deputies in the 230-seat Parliament compared with 73 Socialists. The CDU will have 24.

Pedro Passos Coelho said last night his government would do everything in its power to overcome the great difficulties facing the country and not be a financial burden on Europe.

In the Algarve, the PSD won 37% compared with the Socialists' 23%. Of the nine Algarve deputies in the next parliament, four will be PSD, two Socialist and one each from the CDS, BE and Communist parties.

Friday, June 3, 2011

A general election devoid of joy

Disillusioned by politicians in general and knowing that hard economic times lie ahead whoever wins, Portuguese voters will go to the polls in Sunday's national election with little enthusiasm.

The new government will have little room to manoeuvre. It will have no choice but to abide by the EU/IMF bailout reform rules.

The most likely election result will be a coalition government formed by the centre-right Social Democrats (PSD) and the third strongest party, the conservative CDS. Opinion polls indicate the Social Democrats led by Pedro Passos Coelho will win more votes than the Socialists but not enough to be able to govern on their own.

The possibility of an inconclusive result fermenting a coalition involving the Socialists under former Prime Minister José Socrates is not being ruled out. It was the collapse of the minority Socialist government amid financial turmoil in March that led to this election.

Whatever the make-up of the new government, its main task will be to implement the tough and wide-ranging reforms demanded by the EU/IMF rescue package. These include increased taxes, deep cuts in spending and greater competitiveness.

In the election campaigning, none of the parties have been able to raise customary hopes of a better future. There is a strong perception that corruption, wealth and power, supported by a deeply flawed justice system, have brought this country to the verge of bankruptcy. 

The Bank of Portugal is on record as saying economic hardship will be particularly severe over the next two years. The young in particular are feeling deeply frustrated and are reportedly leaving the country in droves. Further strikes and street demonstrations can be expected in the weeks ahead.

Whatever the outcome this Sunday, there is unlikely to be much rejoicing in the land. 

Thursday, June 2, 2011

Conman Ken on the run in the sun

A wily Welshman by the name of Kenner Elias Jones, a much convicted conman according to the BBC, is now believed to be operating in Portugal.

Charged with stealing thousands of pounds from an employer in the UK, Jones absconded from a crown court before his trial in the UK eight years ago. He has been on the run ever since.

Already convicted more than 60 times for theft, forgery and fraud, Jones has allegedly cheated several companies in Portugal.

Previously deported from Canada and the United States, he is wanted in Kenya where he is alleged to have debts of more than 100,000 dollars. He is said to have posed as a doctor in Kenya and to have administered medicines to children, even though he had no medical qualifications. It is claimed he also posed as a priest.

BBC Wales tracked him to Portugal and interviewed a travel agent in Palmela, south of Lisbon, who claimed Jones did not pay for tickets obtained for his family to join him in this country.

BCC Wales believe he is living in the capital but, of course, it is possible he has moved south to the Algarve and is trying to continue his 40-year criminal career here. 

For more, including images of Jones: 

Wednesday, June 1, 2011

Government issues statement on crime control in tourist areas of the Algarve

 Portugal's Ministry of Internal Administration says the forces of law and order are paying full attention to security in the Algarve and particularly in its most popular beach resort of Albufeira.

In a statement issued yesterday, the ministry says all reasonable measures are being taken to prevent and fight crime. It also points out that crime rates in this country are among the lowest in the EU and that crime in the Algarve region is decreasing.

The statement comes in the wake of alleged attacks on three holidaymakers, two fatal. Police are continuing to investigate the incidents in the Montechoro area of Albufeira. A gang of youths is suspected of involvement.

The internal affairs ministry says there was a slight decrease in crime in general and violent crime in particular in 2010 compared with the previous year. The drop has been much more marked in the first quarter of this year. Serious and violent crime was down 21.7%, and the number of robberies dropped by 20%. In the Albufeira municipality, there were 21.5% fewer violent crimes in 2010 than in 2009 and 9.7% fewer in the first quarter of this year.

Two thousand new police officers are being groomed for the various forces, a new security arrangement now links private home alarm systems to police stations and tighter border controls are in place. The statement emphasises that police presence, visibility and operational activity is being stepped up in popular tourist areas of the Algarve.

Meanwhile, police investigations continue into the death last month of a Scottish soldier, Darren Lackie, 22, and the stabbing of a holidaymaker from Dublin, David Hoban, 44. Police are also investigating the death of a tourist from the northeast of England, Ian Haggath, 50, who was brutally attacked a fortnight ago and has since died.

A spokesman for Britain's foreign office said yesterday it had made "a very minor" change to its travel advice to alert holidaymakers about street crime in the Algarve.