Madness at the supermarket. Madness?

On May Day, a Portuguese supermarket chain decided to run a special promotional campaign offering 50% discount on purchases over 100 euros. It was chaos throughout the country – some people spent seven hours waiting in line, some fought, police intervened in the stores, it was a mess. The Left protested: it was the International Workers’ Day and the supermarket was pitching consumers against workers. As if we were not all workers and consumers… The Government sent their watchdog to find out if price dumping was being practiced. Now, everyone is talking about whether Pingo Doce – one of the largest Portuguese retail chains – was right or not to launch the campaign. This is a sterile debate.

Those who made purchases worth 500 euros only paid 250, those who paid 500 euros saved 500 euros, so on. However the problem is not Pingo Doce, the problem is the country. Would those undignified scenes have happened if we were not in the midst of an acute economic crisis? We do not know, but people have no hope and are facing the future with fear, and rightly so.

Official unemployment figures are at a record high of 14%. This week, the prime minister warned the Portuguese to be prepared because unemployment will continue to grow. The Finance Minister also announced that civil service Christmas and holiday subsidies would only return in full in 2018. The average income of a Portuguese family is around 22 000 euros gross per year. That is around 800 euros per month (multiplied by 14 to include Christmas and holiday subsidies) per working parent. Take out taxes and what’s left is little more than 500 euros.

In an impoverished and depressed country devoid of any spark of optimism or hope in the future, what else did they expect?

My Carnation Revolution at 39

The country that awoke with the military coup that established democracy on the 25th April 1974 was very different. Portugal is one of the countries in Europe that made the greatest leap in development in the last 38 years, and that is also one of the reasons for its current problems. On the 25th April 1974, I was 11 months-old, after having been born at the house of a midwife and not in a hospital. My father had returned from the colonial war two years before. My mother taught French and during the fascist dictatorship there was no such thing as maternity leave. Therefore, as she had no one to leave me with, she took me to school in a baby carrier when I was only 15 days-old. The auxiliary staff took care of me, and my mother saw me during the breaks. My paternal grandparents’ home, in the country, had neither running water nor electricity. My maternal grandmother didn’t know how to read or write. My paternal grandfather had been arrested by the PIDE, the political police.

Today, my sons play with iPads and iPods, they learn English at age of five, and the social protection we are losing with the troika’s adjustment programme is, still, far superior to that which our parents had back then.

The infant mortality rate in 1974 stood at 37.9%. Today it is 2.5%. This indicator is, perhaps, the most relevant of all to show how far Portugal has come since then.

In order to understand Portugal today it is necessary to understand that this small country is the European state that underwent more continuous years of war in the 20th century (13 consecutive years in three African countries). In 1975, after the revolution, it received and integrated peacefully 1.5 million Portuguese who had lived in Africa, more than 10% of its population.

In 1985, with only a decade of democracy, Portugal entered the EEC and had to adapt to the new rules. It lost industries, its fishing fleet, farmers, but it managed to grow 7% a year. It was an Iberian tiger. In 1999, it joined the euro, perhaps too soon, and then the Portuguese started thinking they were rich. Now we are told we are poor.
My parents’ generation feels we are going back to the old days. My generation, which grew up with some abundance and ease, has never experienced such hardships: there is no war, but neither are there any jobs or opportunities. Unemployment, which stands at 14%, is a social affliction which has been unknown in Portugal.

Many people with university degrees are opting to emigrate, just like the poor did during the dictatorship. Perhaps things may be better when my eldest son goes to university. I will be 51 years-old. Then, the 25th April will have been 50 years ago. It’s impossible to anticipate what country this might be in 2024.

The congress of the right-wing liberal social democrats

Portuguese politics are riddled with these oddities. It can be quite confusing for foreigners, especially those from English-speaking countries, when they realise that the centre-right political party that heads the government is called the Social Democratic Party (PSD). I should assuage the fears of right-wing readers at this stage: the party that rules the Portuguese government is not social democrat at all, despite its designation. Left-wing readers should also take notice: don’t be fooled, the PSD is not left-wing, in spite of its name.

The PSD is meeting this weekend in a congress (23 to 25 March), which is expected to be a quiet affair, to acclaim its leader and the current Prime Minister of Portugal, Pedro Passos Coelho, in order to approve new internal statutes and a new programme.

Yes, PSD did in time follow a social democratic programme, but that was back in 1974, right after the Carnation Revolution, when the fascist dictatorship was brought to an end. In 1992, when it was already a relic, the programme was revised by Cavaco Silva (the current President of the Republic). In 2012, the official ideology of the party which is implementing the programme of the troika and the most liberal policies ever in Portugal, is to assume its liberalism a bit further (in the economic sense of the term, and not in the “left-wing” sense that Americans give it). Even if it seems very odd for those who are not acquainted with Portuguese politics, the Social Democratic Party is increasingly liberal, right-wing, and very distant from any European Socialist party.

The minister of the economy with a time limit

Portugal is full of problems, but two of them stand out above the rest: the deficits in public finances and the lack of economic growth. With regard to public finances, the country is making a huge effort with the extremely harsh financial rescue plan being carried out by an all-powerful minister: Vítor Gaspar, minister of finance, has the prime minister’s full political backup to exert an iron grip on the other ministers, apart from being respected abroad (he used to be Director-General for Research at the European Central Bank).

The lack of economic growth is, on the other hand, still lacking solutions. And policies. Álvaro Santos Pereira, the minister of the economy, is a neophyte in Portuguese politics who left his post at the University of British Columbia, in Canada, to land in the biggest ministry Portugal has ever seen, which oversees the economy, transport and communications, employment, innovation, and the labour market. He lacks political ability, he lacks political support and, little by little, the prime minister has been withdrawing his powers and instruments. Last week, an alleged threat of resignation by Álvaro Santos Pereira, in protest against having lost power in the management of the EU funds to the Ministry of Finance, dominated the news. He was called in to see the prime minister who managed to quash a political crisis and keep him in office. Yet Álvaro has failed to understand. If he fails to leave of his own volition, because has lacks the instruments, the power, and the authority to carry out the growth policies the country needs, he will be first on the list to be sacked, without mercy, in the first cabinet reshuffle Passos Coelho carries out.

Unfortunately, Mr Schulz is right

The President of the European Parliament, Martin Schulz, made some comments this week about an appeal that Prime Minister Passos Coelho made in Luanda for Angolan investment in Portugal. “That is the future of Portugal: a decline”, the German social-democrat said, adding that we will “only stand a chance within the framework of the European Union” to guarantee our democratic model with economic stability.

When news of this spread, the Portuguese political parties joined efforts in a rare and strange chorus of criticism directed at the German official. Unfortunately, Mr Schulz is right. A country that is bankrupt, impoverished and “in decline” – because Portugal is certainly not “on the way up” – has to be thankful for the money wherever it comes from. And with the money come the consequences.

Angola’s economic power – which always ends up connected to President José Eduardo dos Santos – extends to Portugal’s largest private bank, to oil and gas corporation Galp, and increasingly to Portuguese media groups. Luanda begins to hold disproportionate power in Lisbon. In the case of the media, Angolan dominance – which is effectively saving media groups from insolvency – should be of concern to journalists. And, incidentally, to the European Union. If Mr Schulz is so worried, let me make a suggestion: The European Union should pass a directive to prevent companies with shareholders or capital from countries without freedom of expression from buying European media businesses. Imagine The Guardian, Le Monde or Der Spiegel, being bought by the Angolans, the Chinese, the Moroccans or the Iranians…

In Portugal the media will soon be under the control of Angolan businesses. Will it be an investment that will generate a large financial profit? No. It comes down to gaining power and having influence in Portugal. It seems logic to me that in the medium term it has the potential to give rise to problems concerning the freedom of the press. My only hope is for time to prove me wrong.

The other problem is of a strategic nature. Portugal is placing itself in the hands of dictatorships. When the state privatises and hands over to the Chinese the power utility EDP or the national power grid company REN, it is placing two strategic assets of the country outside the scope of national strategic security.

If during the Cold War this would be unthinkable, today everything is possible when there is money. Firstly it should be forbidden by European rules to sell companies through privatisation processes to state-owned companies of other countries. This is not to privatise, but to nationalise on the side, transferring sovereignty and essential assets to states that belong to another strategic bloc. Remember how Russia cut off the Ukraine’s gas supply?

Let us imagine an apocalyptic, but not improbable, scenario: North Korea attacks South Korea, or Israel or the US attack Iran. Nato allies are called to intervene and support the punitive actions of the West. Portugal sides with the traditional allies. China opposes it. There is a war. Will China be able to retaliate by using its economic capacity and the possession of essential assets in Portugal? Cautiously, it would be better if we didn’t have to make this question.

Portugal is like a bankrupt family to whom no one is willing to lend any more money. Only the local mafia will give them credit. Nowadays they are the only alternative to enable the children to stay on in school and have food on their plate. Tomorrow someone will knock on the front door to ask them to return the favour. But at what price?

Germany plays with fire

As they are, things will turn out very badly. Philipp Roesler, Germany’s Federal Minister of Economics and Technology, and chairman of the liberal Free Democratic Party, and thus second in command in Angela Merkel’s coalition government, proposed that in order to have access to a second bailout package, Athens should transfer its national sovereignty to the European Union. A document revealed by the Financial Times proves that intent, detailing that it concerns sovereignty “in terms of budget” control. It doesn’t make a difference. With the repeated news of Portugal needing a second financial rescue package, this country is also in the same boat.

This type of measure will never come about without the destruction of the European Union. To invert the principle that each people choses its governors is to kill the spirit of the founders and to kill off democracy. Portugal has over 800 years of history as a nation state. Germany has only existed as a unified political entity since the 19th century – with the results we are all aware of. Punitive missions that culminate with a foreign invasion are dangerous suggestions. With a policy of this nature there is no economy and no finances that can resist. Sadly, at the end of this type of proposition comes first violence, then civil war, then war.

Evangelos Venizelos, the Greek Minister for Finance, rose to the challenge. Some things are not for sale: “Anyone who puts a nation before the dilemma of ‘economic assistance or national dignity’ ignores some key historical lessons.”

The poor president

As the Wall Street Journal announced that Portugal might need a second bailout and Prime Minister Passos Coelho rushed to deny the news, the country was discussing something else.

The last few days have been all about the sacrifices of Cavaco Silva, the impoverished president. In a statement designed to show empathy with the plight of his fellow citizens, the head of state told the press he too might find it difficult to cover his monthly expenses. The Portuguese were flabbergasted.

In a country where an employee earns on average € 800 per month, Cavaco Silva chose to turn down a monthly presidential pay cheque worth € 6,523. Because the law precludes pensions and government salaries from adding up, he settled for € 8,000 per month in pensions instead, of which € 2,900 are representation expenses.

Cavaco said he might soon have to rely on his savings – worth over € 760,000, excluding shares and properties in Lisbon and the Algarve.

This week, after a silly statement to a country whose families had peacefully resigned themselves to being financially bled dry, the President lost all credibility.

An illusory success

The Portuguese minister of finance, Vítor Gaspar, declared last Wednesday (19 January) after a successful issuing of sovereign debt bonds, that “the uncertainty over the success of Portugal’s adjustment process had already been substantially reduced.” The minister obviously was following his role of transmitting confidence, but we are still far from being successful, and the minister was far from being prudent. This year the government claimed €6 billion in revenue by transferring banks’ pension funds to the Social Security, to reach a 4% deficit in 2011, well below the 5.9% outlined in the troika programme.

But this fantastic result is but an illusion. To guarantee a 4.5% deficit target in 2012, the government must carry out brutal cuts to expenditure, almost as big as the extraordinary colossal revenue it collected in 2011. This at the same time it will have to deal with a deep recession which,according to the Bank of Portugal, will reach 3.1%, which will make complying with any target very difficult. All of this without taking into account risks from unexpected events that may take place in the world.

Unfortunately it is far too early for triumphalism.

Shadows and darkness in Portugal

Over the next few years, life of the middle class in Portugal will be worse than our poor lives ever were in the early 1980s. Taxes are going up at an impressive rate, tax deductions are shrinking by the minute, healthcare will be more expensive, and so will the cost of public transport, restaurants, food. Everything, in fact, will be more expensive. Public servants will see their holiday and Christmas bonuses scrapped, but as the president has recently shown to be against this targeting, we very well might see these heftier sacrifices be extended to all taxpayers. Austerity is here to stay, even if the troika’s targets are carried out successfully and Portugal doesn’t need a second financial rescue package (which seems unlikely at this stage). For this very simple reason: cutting back on expenditure will take time, therefore the government is saving or generating revenue through temporary measures. Which overall means that in two or three years’ time these amounts will have to be compensated with either more cuts or more additional revenue. It’s funny how in this sun-blessed country there no longer seems to be any light anywhere.

Madeira, a hole in the Atlantic

As a friend of mine says, the more you hit the bottom, the lower it actually gets. The saying is simple and yet full of wisdom. The same seems to happen with the “holes” in the state’s accounts. The more you dig in search of holes, the more holes you actually find. What is strange is the idea that not many holes were being found before because no one was looking for them. The problem here goes under the name of Madeira, whose public accounts are starting to resemble a Swiss cheese. Foreigners know it as “The Pearl of the Atlantic”, but the Portuguese know it is only a formal democracy.

The Regional Government of Madeira, led by Alberto João Jardim since 1978, concealed from the state’s watchdogs some €1.8 billion in expenditure. If Portugal was well regarded in the international arena for bravely following the Troika’s plan and for even venturing further than was demanded by the international lenders in the first place, it has been struck a blow from the inside and sees itself now lowered to the level of Greece – the swindlers of public accounts.

Yet it is worth bearing in mind that the central government has nothing to do with the ravings of Alberto João Jardim. This historical member of PSD – the same party to which Prime Minister Passos Coelho belongs and whom he has already disavowed – is the politician who’s remained more years in power in the whole of Europe and the Western world. Other than him, perhaps only a few African dictators might have more “experience” in governing people.

Alberto João Jardim governs “his” island as a formal democracy. Since 1978 he has been consecutively elected with an absolute majority, he has never had internal rivals, freedom of the press on the island is a joke, the opposition parties are yet another joke and he himself is a lout, although more intelligent and more cunning than his populism leads to believe. He has already appeared in his underpants on the cover of a tabloid newspaper saying: “I don’t give a shit about the Portuguese Parliament.”

One episode reported in a non-authorised biography by journalist Maria Henrique Espada reveals the culture that led to the debacle in the public accounts and the budgetary hide-and-seek game. In 1979, the current President of the Republic, Cavaco Silva, was then Minister of Finance. During a visit to the island, he noticed that the small municipality of São Vicente had major public works going on everywhere. Cavaco asked what the council’s budget was. The mayor replied. The minister was surprised and said that that was the total budget for an entire region on the continent. “What’s it to do with me?”, the mayor answered back. Cavaco lost his temper: “You should be in jail!…” And he should have company.