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Portugal: After Troika, is the poster child of austerity actually doing any better?

Portugal: After Troika, is the poster child of austerity actually doing any better? www.themuslimtimes.org

The bailout program will be over in May 2014 when Portugal prepares for a possible interim financing program or the recovery of full debt sovereignty after IMF leaves the country. For the past few months articles in some of the most prestigious economic newspapers classified Portugal as “the champion of austerity”, “the new dragon of the South” and another couple of fancy titles that will keep the “markets” (as if these were autonomous) happy, with the country reorganizing its finances and increasing its exports. Yet, is the country actually doing better?

 

This year marks the important 40th anniversary of the Carnation Revolution, where Portugal freed itself from a dictatorship that lasted more than 41 years. Coincidentally the celebrations will be preceded by the end of foreign aid to the country. However, signs show that the end of Troika does not mean that austerity is over; in fact it looks like it is here to stay.

 

Did the debt decrease? – No. Since 1991 the public debt has been increasing. Since the beginning of the bailout program in 2011 it increased from 185 billion to 211 billion in 2013.

Is the high rate of unemployment decreasing? – The government used some data from the last quarter of 2013 to state that unemployment fell by over 2% from 17% to 15%. The government's use of these figures was, however, misleading, particularly when one takes into account the 100,000 people leaving the country every year. Moreover, people taking part in special training programs who are paid below the minimum wage of 485€ per month are considered employed for the statistics.

Did the Exports increase? – Yes they did, making up 6.1% of the growth in the last year, even though small and medium-sized enterprises are still shutting up shop throughout the country.

What is the impact on the population? – Apart from the obvious unemployment rates which affect mostly young people who are leaving the country because of the lack of future prospects, (To note that emigration was encouraged by the Prime-Minister a few years ago), not only have public sector employees experienced severe cuts to their incomes, but there have also been cuts to pensions for the elderly. According to the new budget saving measures for 2015 cuts are here to stay. Adding to this, shops are closing everywhere and whilst university taxes and daily life costs are increasing the rate of consumption is not. Most worryingly, the number of people living in poverty has risen above 2 million (including children, who are starting to be given food at school because their parents can no longer afford to feed them). Many smaller restaurant businesses for instance who have to pay 23% VAT have shut down resulting in yet more job losses.

 

Portugal is displaying the same symptoms as any country that has been prescribed a dose of austerity measures. The finances might suggest some kind of recovery is underway but this has not translated into a social economic reality for those living under austerity. What's more it seems that the Welfare State is in tatters.

 

Evidently, in order to finally put an end to the financial crisis, the debts behind it and its effects some vital constitutional reforms need to be passed, but more dramatic change is also needed. Something needs to be done to bring an end to corruption, which is now rife in the Portuguese political system. Since the IMF program started it has spread from government to local level. There is a strong argument for why the Parliament should face greater, not lesser, cuts than those faced by businesses. Instead Members of the National Parliament have avoided the severe cuts imposed on the rest of the population and Government officials have even been out buying new flashy cars. Former members of the party in power accused of corruption have also been welcomed back into the party fold with open arms. This is not to mention the Government's billion euro bailout of a bank that was involved in one of the most serious fraud scandals in Portugal’s history. And the numerous ghost companies they have saved who owe the state billions too.

 

These are only a few examples of a much wider problem, which is behind the public debt and the result of bad management. If the Portuguese people lived beyond their means, it was because the Governments in power and banks allowed them and actively encouraged them to do so. 40 years on from April’s revolution and I am forced to question how much are we actually free and democratic… Or do the mentality and values of dictatorship still rule?

 

Ricardo Palmela is currently an intern at the United Nations Regional Information Center (UNRIC).

 

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