Iberian Angst

Every man is saving, striking, or sulking for himself

17/04/2012 | by Thomas Fischer

Category: Financial Crisis, Finance, Economy and Finance, Portugal, Southern Europe, Europe

The effects of the eurozone crisis have been felt around the world, but it is Europe’s periphery that has been hit hardest. Staggering levels of debt and rising unemployment have brought social unrest and a re-think of the EU structure. In this dispatch from Lisbon, Thomas Fischer continues our VIEW FROM THE PERIPHERY series.

Henning Kettel, CC BY

Whoever stays in Lisbon as a tourist for the first time easily overlooks the indicators of the hefty crisis weighing upon the country. While armies of analysts predict whether the country, as Greece before it, is likely to need a second bailout package, life in the city appears to continue with a peculiar normality. In the Tagus metropolis the bars are full at night, albeit not quite as full as before. But no one sees the earlier guests who have stayed home because of the crisis. Except for graffiti and placards, little points to the existence of anything resembling protest. Which raises the question: what is different in Lisbon than, for instance, in Athens?

“Portugal is not Greece.” The phrase is still to be heard again and again in Portugal, before and after the Portuguese call for external financial help a year ago. In order to receive a 78-billion-euro emergency credit, the country committed itself to an agreement with the “troika” to implement a strict regiment of financial adjustments and structural reforms. The point of departure in Portugal was already difficult to compare with that of the PIIGS-southeast.

In Portugal, for instance, the budget deficit and the national debt are markedly lower than in Greece. At the time of the call for help, a Socialist minority government held office. In the meantime, two middle-class opposition parties have assumed control, but reaffirmed the country’s commitment to the Socialist-negotiated agreement. With an absolute majority at their disposal, there were no nail-biters during any of the delicate fiscal votes. The government wants to abide by the requirements of the troika, whatever the cost may be.

Accordingly, the overhauled budget deficit should sink to three percent of the gross domestic product in 2013. For its part, the government neither wants to ask for more money nor for more time to reduce its deficit. Meanwhile, the opposition Socialists are calling for more time. They accuse the government of going further than the agreement with the troika required on many points. For the most part though, there exists between the coalition parties and the Socialists a fundamental consensus, which the opposition parties on the far left certainly do not back.

Whether all that is enough to overcome the crisis remains to be seen. Like the international financial climate, the forecasts for Portugal’s economy have become gloomy. In 2012 the government of Prime Minister Passos Coelho expects a drop in economic performance of 3.3 percent. In 2013, however, the government predicts a slight rise; but the national central bank estimates zero growth. Much more than candlelight at the end of the tunnel is not in sight. Even the troika was surprised at the rapid rise of the unemployment rate to 15 percent in February. This number would have likely been higher if an estimated 150,000 men and women hadn’t packed their bags and left last year. They sought their fortune in Angola or Brazil, in France or in Switzerland.

The government also points happily and often to the differences in the social peace. Aside from small clashes and ungentle, but indeed limited police deployments at individual protest actions, the demonstrations are running peacefully. On March 22, the participation in the one-day general strike of the leftist trade-union federation CGTP was rather moderate. Whether it is worth it to lose a day’s wages and, where possible, not to have a temporary contact extended is questionable for many people, despite all the anger.

It is often said that the Portuguese are not inclined to explosive reactions. Social researchers and church people, however, have warned now and then that the camel’s back could break. Were there a standard pain threshold in the European Union, it would likely have been exceeded by now due to depressed wages and rising unemployment, the trend toward more precarious employer-employee relationships, and the number of people who cannot pay back their bank loans. But Portuguese belts seem to have many notches, and Portugal did not fall from the sky for the first time at the onset of the world economic crisis. Economically and financially the country has already experienced a lost decade. The crisis has become a steady part of everyday life.

Portugal understands that it must correct its imbalances. Banks cannot throw cheap loans at their customers forever. And yet the feeling prevails that the state is strong on weak issues, and yet does too little on important matters. “Europe,” too, is no longer what it once was.  Earlier, one associated “Europe” with the money that came from Brussels and flowed into road construction. Today, one thinks of Angela Merkel with a mix of resignation and bad blood. The Portuguese head of state is often accused of acting under the instruction of the German chancellor. And next to the admiration for BMW, beer, and Bayern Munich, specters from an uglier past are being raised.

The implementation of the troika’s requirements is a balancing act. The fear is great that tax hikes, austerity measures, and a credit crunch could further choke the economy just when structural reforms are capable of reviving it. Undaunted, the government is implementing, among other things, painful changes to labor law. For example, it wants to reduce severance packages and do away with four national holidays. This is supposed to make the economy more competitive. But many long-standing shortcomings, such as in innovation and marketing, have not been addressed.

Last year a special tax detracted from employees’ holiday bonuses. From 2012 until the end of 2014, civil servants with monthly incomes of 600 euros or more will see their vacation pay and holiday bonuses reduced or cut altogether. This year is likely the last in which many families will receive a large income tax return, as they now can deduct much less from their taxes than before.

The spark of protest does not want to ignite properly. Every man, however, is striking, saving, and sulking for himself. “With or without receipt?” doctors sometimes ask their private patients, who pay their fees out of pocket and can write off only 10 percent, instead of the earlier 30 percent, from that on their taxes. Unsurprisingly, cheating on taxes and shadow economies are becoming more and more common.

Speaking of health. The number of blood donors, who used to be generally exempt from fees in public facilities, but now only know the promise of heavily reduced perks, has dropped since the beginning of the year. That, too, is a clear signal to the government.

While the middle class melts away, poverty is on the rise. Around 320,000 people, at least three percent of the population, count on the support a network of “food banks against hunger” for sustenance. The food banks apportion EU surpluses, supermarket products that are about to expire, and donations in kind from supermarket customers. It is alarming how important such help is, but also comforting that it exists. 

THOMAS FISCHER is a freelance correspondent for the Neue Züricher Zeitung.


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