Lisbon, 23 Feb – After the great crisis of 2008 which brought the economies of the Western world to the brink of collapse, we were told that the only possible answer, inevitable and necessary, was to take the path of public spending cuts and sacrifices, in one word austerity.
Every nation has seen cuts to public services, salary reductions, freezing of pension increases and wild privatization of state-owned companies or assets.
The damage of austerity
Portugal was not saved from this fate, one of the countries most affected by the profound economic crisis, that in 2011 was forced to resort to the Bailout program of the International Monetary Fund, that is, finding itself unable to finance its public debt, Portugal obtained from the Troika (that is, the European Commission and the European Central Bank in addition to the aforementioned IMF) and loan of 78 billions of euros, in exchange for a discounta drastic reduction in public spending and a significant cut in wages and pensions.
In the space of just two years, the government led by Pedro Passos Coelho at the head of a strongly pro-European coalition made up of social democrats and popular people, he cut funding for education, health and social services of almost the 20%. Obviously the lack of investment and trust, combined with the deterioration of living conditions it has further worsened the situation. Unemployment has reached peaks of 17,5%, the poverty rate has grown dramatically and the number of insolvent businesses forced to close has increased at the rate of 40% per year.
At the end of 2015 it was clear that the austerity-based experiment had failed and the political elections with the collapse of consensus for the government coalition decreed its end.
Keynesian policies
The new government, formed by the new prime minister's socialist party Antonio Costa and by a number of smaller left-wing parties, immediately made it clear that the nation's economic policy would undergo an important turning point by putting an end to the restrictive measures imposed by the European Union. Obviously the pro-European forces were quick to call it "voodoo economics" in a mocking tone, predicting disasters, a new and more binding intervention by the Troika with further and even more significant spending cuts.
In reality there was nothing esoteric in the economic theses of the new government, but a simple Keynesian reasoning, that is, cuts in public spending compress demand, to return to growth we need to significantly stimulate consumption and investments. And so it was, with a series of measures the Portuguese government has increased minimum wages, brought pensions and public salaries back to pre-crisis levels (some had been cut by more than 30%) and even reduced working hours and increased vacation days. At the same time spending on health and social assistance for less well-off families has been increased significantly, as well as that for investments through tax relief for companies and financing for small and medium-sized businesses. The idea of tax relief on foreign pensions is also interesting, which has led many elderly Europeans to move to this country.
The disaster predicted by the pro-austerity Cassandras did not materialize, and indeed Portugal has strung together a series of 13 consecutive quarters of gross domestic product growth and brought unemployment levels to pre-crisis levels or around 7%.
Despite the deficit levels going well beyond the limits imposed by the Fiscal Compact, the European Commission was careful not to apply sanctions for the open infringement procedure, allowing the Portuguese government more room for maneuver, but certainly not out of a good heart but to prevent a further growth of anti-austerity movements throughout Europe. Confirming this in March 2018 Portugal has reached an agreement with the EU for keep out of budget accounting and therefore of the deficit, the money spent on the recapitalization of a major bank with Portuguese state participation, la Caixa Geral De Depositos, exposing once again the true face of Europe, that is to say play with numbers according to your interests and political objectives.
Portugal has therefore managed to increase public investments, increase employment and initiate constant and sustainable growth. We have always been told that all this was impossible to achieve except through a very rigorous policy of cuts and sacrifices, the mantra of the ultra-liberalists has always been "there is no alternative to austerity".
The success of the Portuguese nation can be a source of inspiration for other European countries, and an opportunity to put an end to the failed restrictive policies that have brought many eurozone economies to their knees and substantially worsened the living conditions of the less well-off social groups.
Claudio Freschi
source – https://www.ilprimatonazionale.it/economia/grande-bugia-austerita-lezione-portoghese-105786/
