Finance and Economy

Portugal: When Fiction Becomes Reality

It was a well-known fact that Portugal’s future was not going to be easy when it was forced to turn to international aid due to the impossible conditions imposed on it for access to external financing. However, few immediately understood the devastating and dramatic consequences which would be introduced into the lives of Portuguese people as a result.

Nevertheless, the terms imposed by the Memorandum of Understanding allowed us to foresee the future: unacceptable conditions, forfeited sovereignty and, above all, the imposition of an austerity strategy which has already been tested and has already failed (it had been revealed to be a fiasco in the 70s in Latin America), with the privatisation of strategic sectors, tougher working conditions and the impoverishment and pillaging of natural resources.

A new public attitude

The current conditions of daily life have confirmed this to be a failed strategy. Through growing political and social intervention and the pressure from the civic movements which have emerged from the crisis, however, the perception of the problem has gradually changed. This new approach allows a radically different understanding of public debt and is being translated into both the refusal of debt repayment under the proposed terms and a fierce condemnation of the absurd politics that have been uselessly imposed, which have only had brutal effects. What is being imposed are not reforms in order to allow a rational use of the resources, nor even a fair distribution of wealth for a new kind of development. What is being imposed is an austerity dictatorship, which, despite all the cuts, has increased the debt instead of reducing it. Public debt has now reached unsustainable levels and caused a spiral of recession, exacerbating social and economic inequalities and leading to the uncontrolled exploitation of the natural resources which are crucial to our future.

When poverty does not pay debt

The severe consequences of this strategy appeared rapidly and contradicted all the predictions made by the Troika. They were obliged to correct all their own predictions about Gross Domestic Product (GDP), the unemployment rate, the expected deficit, the debt evolution… in other words, everything. In as little as two years, after six revisions, we saw the obvious mistakes of the imposition of this strategy and of the erroneous expectations of the anticipated consequences.

We can see serious mistakes in the economic and financial plan. In spite of the brutal tax increase on income and VAT, the drastic reduction in family incomes, especially the most deprived families and the retirees, the increases in working time and the deregulation of the labour market, the results have been disastrous: a drastic fall in the amount of income tax collected (in the first trimester of 2013 this decreased by €1,9 million), a contraction in the economy, a flurry of bankruptcies (25 per day). All of these measures end up having a recessive effect since they paralyse the economy and provoke a large fall in GDP (4% in the first three months of 2013) when the prediction for this year had been an increase of 1.2%. Public debt, in the meantime, is now over 126% of GDP.

A level of emigration, comparable to the Salazar period

The persistent and insane imposition of austerity packages and restrictive measures in matters of accessing public goods and services, and the exercise of fundamental rights is an extreme strategy, one could say, on a social level. It is limiting resources and healthcare, education, protection during old age, AIDS and social support, pensions, everything which the most fragile groups of society depend on. This has had devastating consequences, especially for unemployment which has reached historic highs. Over a million people are without work and more than half of them survive without any kind of social aid. Current estimates foresee this situation worsening. These numbers are especially bad for the young. Most of them are in precarious employment; 40% are unemployed. They have no future prospects, no hope and no place, even though they are Portugal’s most qualified generation. They are forced to emigrate – around 360,000 have done so in the past three years – in an unparalleled exodus, comparable only to that of the 60s during the Salazar dictatorship when the country was involved in a colonial war.

Meanwhile, poverty is on the rise, having reached two and a half million people, or about a quarter of the Portuguese population. Schools have to deal on a daily basis with starving children. Food aid requests have doubled in the last few months. In this context family has become the only possible refuge, bringing together different generations which have been thrown into misery and forced to live in overcrowded houses.

Notable outcries of social emergency

This is the slow and painful death of a country and its economy, with those who are suffering being stripped of their dignity, their rights and hope. The heavy and unbearable environment has led to ever more demonstrations, protests, and different forms of struggle with unlikely alliances being formed to combat these policies and this government (in which several Goldman Sachs members serve). Much action has been taken, some of which is symbolic – such as singing “Grândola Vila Morena”, emblematic song of the 1974 revolution, in the parliament or in the streets – and new action platforms have emerged, bringing together the traditional movements (unions) and the new civic movements, constructing bridges and fostering mutual understanding in order to organise, for instance, a general strike, bringing together both trade unions – CGTP [1] and UGT [2].

There is an environment of clear and deep rejection, evident in the constant public statements which convey both disapproval and criticism of former government leaders and economists across all the parties, left and right. We have seen respectable republican senators from the most diverse areas, from Christian Democrats to Socialists, former Presidents, ombudsmen, constitutionalists and various Catholic Church leaders, among others, denouncing the situation as a social emergency. They also worry about the growing separation between institutions and citizens, the widespread mistrust of politics, the explosive social situation we are experiencing and the imminent risk that the current indignation becomes an untameable wrath.

These people, above all, understand the meaning of the street protests and the social drama. As austerity ruins the country and Europe and debts keep growing they are worried about a future which seems to be more and more unlikely and they demand serious, deep, coherent political decision-making.

For a debt renegotiation led by the state

It is time to say ‘enough’. It is time to mobilise Portuguese society, to put a stop to this poverty which does not pay debt, to demand a political solution. Moreover, this solution must include an urgent debt renegotiation, as we, in The Citizen´s Audit of Public Debt, together with unions and other invited civic organisations will stand for this week in the campaign we are launching. We stand for a renegotiation led by the Portuguese State and not a Greek-like renegotiation. It is not neither impossible nor unprecedented in contemporary history. It happened in 1953 (the London Agreement) before the German difficulties, allowing partial debt relief and renegotiation of interest, deadlines and payment terms. This historical fact was brought to life a few months ago, in a joint statement, by a group of citizens auditory organisations.

The time for decision-making has come. The time for making the State assume the responsibility of leading this difficult process has arrived. During the negotiation period this process might delay debt payment. It also requires public awareness-raising and follow-up, as well as public participation and scrutiny. We are forced to renegotiate the debt since it prioritises markets over human rights. We need this answer in Portugal and in Europe to defend a European heritage and civilisation being captured by the financial markets.

Renegotiating is urgent, both here as in other countries. There is a social debt, a commitment which is first and foremost to the citizens. It is a commitment of the highest priority and it cannot be betrayed.

The Social Europe is at stake

There is a fight taking place in Portugal, as in other European countries – Spain, Ireland, Greece, Cyprus, Italy, Slovenia -, between keeping welfare states (precisely the symbol of the European project identity) and maintaining privileges for a few, by means of policies designed on their behalf and against the interests of the large majority. The Portuguese people do not accept, as certainly no one will, becoming hostages of a political counterrevolution, imposed by markets, against Europe and against democracy.

Time is of the essence. Choices have to be made. Peace and collective safety are at stake. There is a different way, a green and socially sustainable one, demanding creation.

References

[1] Confederação Geral dos Trabalhadores Portugueses – Intersindical Nacional (CGTP-IN): General Confederation of the Portuguese Workers.

[2] União Geral de Trabalhadores: General Union of Workers.

Newsletter

Sign up to the newsletter for handpicked highlights of articles, interviews and translations published each month.

Select the language(s) for which you would like to receive notification :

Select the theme(s) for which you would like to receive notification :

Cookies on our website allow us to deliver better content by enhancing our understanding of what pages are visited. Data from cookies is stored anonymously and only shared with analytics partners in an anonymised form.

Find out more about our use of cookies in our privacy policy.