Portugal: austerity interrupted…but for how long?


Last month, nationwide anti-austerity protests in Portugal turned into celebration when the country’s centre-right government, victorious in national elections, saw its programme rejected in Parliament. The torch was passed to a leftist coalition promising to reverse years of painful austerity.

“Inside defeated, outside, rejected!” supporters shouted, broad smiles on their faces as they witnessed Prime Minister Pedros Passos Coelho’s pro-austerity alliance thwarted by a coalition led by former Lisbon mayor António Costa.

“I am here to celebrate the fall of the government,” said pensioner Manuela Rodrigues, 63, carrying a broomstick over her shoulder outside parliament.

“This government has destroyed the lives of the Portuguese and impoverished them,” she told Equal Times. She says her income dropped by a third in the past few years and that her daughter was forced to emigrate to Paris to find work, joining the estimated 485,000 people who left Portugal between 2011 and 2014 in the search for better opportunities.

Prime Minister Costa is leading the first leftist government in Portugal supported by the radical left and the Communist party since the country’s democratic rebirth four decades ago.

Passos Coelho’s government retained power in the 4 October election but lost its parliamentary majority and was forced to resign 20 days later. In the parliamentary vote, the left-wing parties (the Left Bloc, the Communists and the Greens along with the centre-left Socialist Party) rejected the government’s policy proposals.

Passos Coelho removed Portugal from its €78 billion bailout program last year. Austerity measures continued nevertheless, and while the prime minister flaunted the country’s growth to garner more votes, Portugal’s public debt is still nearly 130 per cent of GDP, with growth stalling at 0.9 per cent last year.

During the financial crisis of 2010-2014, Portugal was racked by soaring unemployment and plunging salaries, making it one of the most unequal countries in Europe.

However, the parliamentary vote has given supporters of Costa’s leftist coalition hope that the nightmare of austerity might finally be over.

The Socialist-led alliance – which has 122 of the 230 seats in Portugal’s parliament – has promised salary increases and tax cuts, despite warnings that this could lead to a Greek-style finance collapse.

“The agreement was necessary to ensure the change that the Portuguese desire,” Prime Minister Costa said after the motion to reject the Coelho government was approved.

The 54-year-old Socialist leader, however, has also ruled out leaving the euro and has agreed to respect EU fiscal rules.


Portugal’s new poor

The financial crisis has led to a wave of “new poor”. The number of Portuguese workers earning the national minimum wage of €505 tripled between 2005 and 2014, according to a report by the European Commission, from 5 per cent in 2005 to 12.9 per cent in 2014.

An estimated 621,000 people in Portugal were unemployed in September this year, according to the Portuguese National Statistics Institute, with a large portion of the population not receiving any social support due to the cuts.

And little has been done to moderate the effects of the crisis on children. As highlighted in a report by the Catholic charity Caritas, Portugal has seen the EU’s biggest growth in poverty and social exclusion amongst children due to the ever-increasing number of adults who are unemployed or working poor.

“The main problems have emerged due to the application of the troika memorandum and the impacts it had in terms of labour legislation deregulation and disparities,” says Armenio Carlos, head of the country’s largest trade union, CGTP.

“The troika [the European Central Bank, the International Monetary Fund and the European Commission] are highly responsible for what has happened in Portugal and they know that it constitutes a violent attack against human rights.”

Although Portugal’s super wealthy have also been affected by stringent austerity measures (the number of millionaires in Portugal dropped to 51,000 in 2015 from 76,000 in 2014 according to the latest Global Wealth Report from investment bank Credit Suisse), the most vulnerable people have been worst hit.

“What we have witnessed is a decrease in income levels and a concentration of wealth at the top of the pyramid,” Portuguese sociologist Elisio Estanque tells Equal Times. “The consequences are a loss of economic power and investment. Unemployment remains high and the economy did not grow sufficiently.”

The consequences? “An alteration of the economic structure, emigration, a rise in poverty and inequality, and a great pillar of the economy, BES bank (once Portugal’s second largest bank), collapsed,” says economist Joao Cesar das Neves, from Lisbon’s Catholic University.

So what’s next for Portugal? The Socialist Party wants to reverse cutbacks and reforms while raising household incomes but it faces stiff resistance from EU partners who want to know how Portugal will manage its public finances.

It is now up to the Costa government to make good on its campaign promises while avoiding another financial crisis.