Portugal: a European path out of austerity?
The Financial Times reports that Portugal’s economy has rebounded since António Costa, the prime minister who forged a partnership between the moderate and hard left reversed post-crisis budget, by “turning the page on austerity”, stressing the idea that “sacrifice is over”.
Portugal, which was hard hit by the European debt crisis, has now halved unemployment to 6.7% and the budget deficit could be eliminated this year for the first time in over 40 years. Since 2016 Portugal has consistently beat its deficit targets; the deficit of 0.5% of GDP recorded for 2018 being the country’s smallest shortfall since democracy was restored 45 years ago.
Portugal’s government reversed public spending cuts, allowing the deficit to swell well above agreed objectives and ultimately proving to EU officials that by putting more money in people’s pockets it could lift growth, make it easier to meet budget targets, raise incomes, lift private investment, cut unemployment and still have sound public finances.
“Public spending has stayed under control, unit labour costs have been reduced, hence they have been able to attract more foreign direct investment and increase their exports,” says Ivan Scalfarotto, a former Italian trade minister and centre-left MP.
In the public sector, workers are pressing Mr Costa to go further in overturning austerity.
Nurses are among swathes of state workers — from teachers to police inspectors and prison guards to firefighters — who have taken part in months of small-scale crowdfunded strikes to lift their incomes as the economy recovers following years of austerity.
Daniel Traça, dean of Lisbon’s Nova School of Business and Economics, believes Mr Costa’s main accomplishment lies in ensuring that the recovery has benefited the most vulnerable people.
This, he says, has convinced the country that “sound public accounts are compatible with social cohesion”. Mr Costa has shown that the financial crisis could be tackled without destroying jobs and living standards. As he himself puts it: “It’s no longer a matter of political discussion, it’s a matter of fact”.
An announcement by Costa (left) of a 10-year national investment programme designed to pump €20bn into transport, energy and environmental projects, may have been overlooked by people challenging his approach as not offering environmentally sustainable growth. Other criticisms were voiced in a recent Reuter’s article.
Perhaps a British Labour government – which favours national and regional investment banks – will also ‘turn the page on austerity’ and add to the measures taken by the Portuguese government by bringing in a Green Deal surpassing the American version, extending the greening of infrastructure to the greening of transport.