2013 - A worrying and wobbly start

On New Year’s Day Portugal’s head of state, President Aníbal Cavaco Silva, had second thoughts about the legitimacy of the 2013 budget he had signed into law the day before. Critics claimed that some elements of the budget were unconstitutional. The president decided he had better refer the matter to the country’s highest court.

Cavaco Silva, a former professor of economics and former leader of the centre-right PSD party, expressed concern that while everyone would be affected by the proposed hikes in taxes and cuts in welfare payments, some would be “more penalised than others.”

He also noted that “Portugal’s foreign debt, now twice as high as the country’s annual output, is unsustainable.”

In a television address he added: “Fiscal austerity is leading to declining output and lower tax revenue. We must stop this vicious circle.”

The centre-right government of Prime Minister Pedro Passos Coelho has argued that the highest tax increases in living memory contained in the new budget are necessary to meet the terms of the country’s eurozone bailout. That he was “profoundly isolated” in his pro-austerity stance was one of the least impolite remarks any of Passos Coelho’s domestic political opponents could come up with.

“Portugal is a crisis country that is not as much in the public eye as Greece for instance, but austerity has the same effect on the Iberian Peninsula, especially with big neighbour Spain in crisis too,” commented the Social Europe Journal (SEJ).

“Will the relevant decision-makers ever notice that their strategy is not working economically and is more and more undermining democracy on all levels?,” asked  the SEJ, a forum for debate and innovative political thinking, which addresses issues of critical interest to progressives across Europe.

In the SEJ’s opinion, “the year we have just left behind has clearly demonstrated that in the current European crisis, politics is stretching national democratic orders to breaking point, especially in crisis countries. Unfortunately, this trend looks set to continue in 2013.”

According to the Financial Times: “By approving the budget, but also asking the constitutional court to vet the measures, Mr Cavaco Silva has avoided a direct political confrontation with the government while at the same time taking action that will at least partially appease critics of the austerity measures. However, the decision is expected to increase political tensions between the president and the prime minister.”

The Wall Street Journal said: “If the 2013 budget is deemed unconstitutional, it may complicate the government's efforts to reduce the budget deficit to 4.5% of gross domestic product this year, from an expected 2012 deficit of 5% of GDP, part of the commitments included in a €78 billion bailout agreement with the European Commission, the European Central Bank and the International Monetary Fund.”

The BBC among others pointed out that the proposed tax hikes in the latest budget are equivalent to more than a month’s wages whilst Portugal is entering its third year of recession with an unemployment rate of nearly 16%. Among the country’s youth it is topping 35%.

According to Eurostat, the EU's statistical agency, some of the unemployment levels are the highest ever seen in Europe, with Portugal along with Spain, Greece and Latvia the worse affected.

The latest Gallup poll on the subject found that 89% of adults questioned in Portugal thought this was a “bad time” to find a job.

Wishful thinking maybe, but nonetheless intriguing as we lurch forward into the new year gloom, 7% of Portuguese adults told Gallup they were optimistic about this being a “good time” to find work.