Portugal wants to end with austerity

Under the beating sun of the Tagus Valley this morning in May, Sugal's Benavente factory is idling while the tomato season kicks off in July. The workforce has been reduced to a few dozen employees, some assigned to maintain the facilities, the others working in the workshop that produces sauces and ketchup under the national label Gulosa and for major brands.

Founded in 1958 by the Costa family, Sugal is now one of the major players in a globalized market. With the neighboring site of Azambuja, that of Benavente, one hour drive north-east of Lisbon, absorbs 600,000 tons of tomatoes a year, half of the country's production. This is without counting its other sites, one in Andalusia, two in Chile.

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The crisis that Portugal has been trying to overcome since 2008, Sugal claims to have crossed without difficulty. "Our business model is based on the internationalization, quality and export of 90% of our production. Today, the key is to reduce its dependence on the domestic market, launches Pedro Paiva Couceiro, the financial director. The government still has to reduce the taxes imposed on companies so that they can regain their ability to invest. "

From his office overlooking the port of Lisbon, Bruno Bobone, head of the logistics company Pinto Basto and president of the Chamber of Commerce and Industry, pushes the point: "The economy is improving thanks to the work of the Portuguese and companies to modernize and conquer markets. The state must not ruin its efforts by spending the money it does not have. ".

"Workers tightened their belts"

A business speech that makes jump Carlos Silva, Secretary General of the UGT, the main reformist union. "With the crisis, the workers tightened their belts. Also, the arrival in power of the Socialists in 2015, gave rise to great hope to end the obsession with the deficit and debt. How long should the Portuguese suffer? "

These positions illustrate the contradictions of society facing current Prime Minister António Costa. They are the result of ten years of crisis that have plunged Portugal to the bottom before starting a recovery whose strength is difficult to measure.

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By integrating the European construction in 1986, this small poor country, which comes out of fifty years of dictatorship, will experience a spectacular takeoff thanks to the access to the single market and structural funds granted by Brussels. But after the sluggish growth of the 2000s, the crisis of 2008 is a shock, revealing the weaknesses of a weak industry, whose main competitive advantage remains the low cost of labor.

 Tourists in the cable car in the city of Porto in Portugal./Gunter Standl / Laif / REA

The reaction of the government, led at the time by the socialist José Sócrates, does not help: faced with the crisis of its sovereign debt, it advocates a recovery that worries the markets a little more. Result: in 2011, the state must apply for a loan of 78 billion euros to honor its bills. «A loan granted by the EU countries and the International Monetary Fund (IMF) under strict conditions and the tight control of the troika – European Commission, European Central Bank and IMF -», says a senior Portuguese official stationed in Brussels.

A liberal program dictated by the donors

State slimming, labor market reform, privatization: Social Democrat Prime Minister Pedro Passos Coelho, who then takes the helm of the country, will apply without faltering the liberal program dictated by the donors.

But austerity has a high social cost. "These are black years, very violent, where many have found themselves without work, without housing, to be able to rely only on family solidarities"recalls Custódia Domingues, 50, co-director of a communications company. Nearly 500,000 Portuguese, 5% of the population, then take the road to exile.

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In this context, the arrival in power of the socialist António Costa, in October 2015, in favor of an agreement with the Communists and the Left Bloc, brings the promise of a better. The challenge of the former mayor of Lisbon is bold because it is to break with rigor while continuing to straighten the public accounts. The right does not fail to denounce an alliance "Geringonça" – wobbly – leading the country to disaster.

Three years later, the prognosis did not come true. "If we look at the indicators, we can even say that the situation has improved significantly"says Ricardo Mamede of the Institute of Public and Social Policy in Lisbon. Growth, negative between 2011 and 2013, reached a record 2.8% in 2017 and now stands at around 2%. After a peak of 16.2% in 2013, unemployment fell to 6.6%. As for the public deficit, it was 11.2% of GDP in 2010, it should be close to zero this year.

"But the greatest achievement is to have restored confidence. We can not govern a country by putting its population under the constant threat of shock therapy ", insists Ricardo Mamede.

All these successes explain the interest aroused by the Portuguese experience with all those who, in Europe, seek to counter the liberal proponents of austerity.

Portuguese success remains precarious

Portugal, model to follow? "In fact, the recovery is mainly due to the abrupt adjustment of the cost of labor, which has made companies more competitive and attracted foreign investors, nuance Julien Marcilly, chief economist of Coface. Not to mention the effects of the difficult measures taken by the previous government ". "And the benefit of an exceptional alignment of planets – from the fall in the price of oil to the recovery of the euro zone through the capture of the flow of tourism in the Maghreb – which the country knew how to profit with agility"adds consultant Paula Garzon.

But this success remains precarious. "Portugal is better, but I do not know if he's fine"summarizes a diplomat, a connoisseur of the country. Economically, weaknesses persist. Especially in the still fragile banking sector and the industry struggling to move upmarket. Not to mention a public debt that is decreasing but remains at a high level: 121.5% of GDP in 2018.

Socially, the situation remains unstable. Despite the Costa's many measures in favor of the working classes – raising the minimum wage to € 700, social safety nets for the poor, revaluing pensions, among others – the difficulties of the daily life fuel claims, including the 650,000 Portuguese civil servants whose Career development has been "frozen" between 2011 and 2017.

"The dynamism of the economy has not solved the problem of low wages, precarious work, housing difficulties, rising inequality and the risk of poverty. Yet the government continues to worry more about numbers than people ", Says Eugenio Fonseca, President of Caritas Portugal.

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Faced with these multiple challenges, and the impatience of the Portuguese, Antonio Mendonça Mendes, Secretary of State for Tax Affairs, calls for time. "Four years ago, everyone promised us the disaster, including Brussels. Yet the results are there: the accounts are held and the grip of austerity is loosening ", he pleads.

A "good student", Portugal? The expression makes the Secretary of State smile: "In Europe, there is no student, no teacher, but member states that want to be respected. "

(tagsToTranslate) Travel in Europe (t) Portugal (t) Europe (t) austerity (t) finish

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