Mon, Apr 04, 2011 page9

• Portuguese look to ex-colonies for help with crisis

  • By Michael White / The Guardian, LISBON
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  In the port district of Lisbon a steady trickle of young people pick their way through cobbled streets toward the Angolan consulate. Unskilled Africans may still be heading for Europe via the toe of Italy but, as their own country’s domestic crisis deepens, many educated Portuguese head the other way.

  On March 23, the socialist minority government of Jose Socrates collapsed after the conservative opposition pulled the plug on the fourth package of deficit-cutting measures designed to appease Portugal’s creditors. Ratings agencies cut Portugal’s status, twice, to triple B-minus, one notch above a junk bond, and interest rates on five-year government borrowing rose above a crippling 9 percent, more than double Germany’s. It leaves most political and financial analysts convinced Portugal cannot avoid the kind of financial bailout that the EU and IMF forced on Greece and Ireland before 9 billion euros (US$12.79 billion) becomes repayable this month and in June.

  Yet Socrates insists “Portugal doesn’t need to tap into any bailout” and says he will prevent it happening. Some opposition members of parliament want a grand coalition, others an election campaign which, Portuguese law states, must last 55 days.

  Local unemployment is already in excess of 11 percent and Portugal is braced for renewed recession. So the grim-faced visitors to the Angolan consulate had already made their personal decisions to seek opportunity in London, Amsterdam or, increasingly, in former colonies such as Brazil and Angola.

  How did it come to this? On Thursday, Portugal’s budget deficit was revised upwards to 8.6 percent — way over its 7.3 percent target, but still less than Britain’s. Its accumulated debt, about 88 percent of GDP, is lower than Italy. Nor did Portugal enjoy a boom-and-bust decade of rising wages inside the eurozone. Its banks did not go mad and build ghost housing estates like Ireland’s — or underwrite their subsequent bankruptcy as Dublin did.

  As elsewhere in what the Chinese are calling “the North Atlantic crisis” Portugal’s post-2007 crisis was similar to its neighbors, but peculiar to itself, rooted in habits that pre-date even the “Carnation Revolution,” which peacefully ended 50 years of dictatorship in 1974.

  “The problem of our democratic framework is we do not have a political system strong enough to say: ‘No more money’ to the demands of private interest groups and some state groups,” says Joao Confraria of Lisbon’s Catholic business university, FCEE-Catolica. “We have failed to forge a viable domestic consensus for 150 years.”

  Life goes on much as usual. Lisboners complain of shrinking budgets and rising prices. However, their modern European city is criss-crossed by enviably wide boulevards, enough for six lanes of cars, and orderly rows of shade-giving trees just coming into leaf in the spring sunshine. The crisis bubbles away below the surface.

  During Portugal’s modernizing years, low productivity in industries such as textiles were sustained by EU cash transfers, by remittances from workers overseas, by foreign investment and foreign borrowing.

  “For 20 years we have been running a current account [trade] deficit close to 10 percent,” Confraria says.

  As conditions tightened across the EU — and the emerging BRIC nations, including Brazil, rebalanced the world economy — the fix became unsustainable. Little wonder that the Portuguese look to their 190 millon-strong offspring for succor.

  Just as China has offered to buy some of Lisbon’s debt, so new Brazilian President Dilma Rousseff made a similar pledge to help out.

  “We could simply merge with Brazil instead of with the EU,” say Lisbon wits.

  However, the immediate double problem, political and financial, is European. Socrates has cut wages, pensions and benefits, and raised taxes in three packages which the main opposition, the center-right Social Democrats (PSD) endorsed. However, in February, they balked at a fourth, triggering Socrates’ resignation.

  A squeeze too far? Or mere opportunism?

  “The political crisis is not our fault. We brought in new measures on which the European Commission and others had been briefed,” government spokesperson Mafalda Pereira said.

  Portuguese Finance Minister Carlos Costa Pinas says the “cost of financing [the debt] was substantially worsened by the opposition.”

  However, the PSD is clearly banking on the electorate to repudiate a socialist (PS) government that has inflicted so much pain. With 81 seats against the PS’ 91 in the 230-deputy chamber, the PSD, led by businessman, Pedro Passos Coelho, is 10 percent ahead in recent polls. It knows that it can obtain an overall majority in tandem with smaller, more conservative rivals, as the PS cannot do on the left.

  “A left coalition is not possible for several reasons, ideological and historic” says Andre Freire of the Lisbon University Institute’s political science department. “The left bloc is libertarian and the communists are orthodox. There is a lack of willingness to compromise.”

  As for the grand coalition option to meet the crisis, the PSD has been in informal coalition to support PS austerity up to now. However, Portuguese politics is notorious for “bickering and point-scoring” among the very male parliamentarians whose faces dominate TV news.

  “Will voters blame the government or the opposition? That is the million-dollar question. It depends on which of the major challengers best gets his message across,” Freire said. “Whoever wins, it is difficult to understand how they will provide different answers.”

  The omens are not good.
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