Nobody can accuse Portugal’s free-market government of failing to try.
Premier Pedro Passos Coelho has gone beyond the demands of the EU-IMF Troika under the terms of Portugal’s €78bn loan package, winning plaudits from Europe’s austerity police and a pat on the head from Wolfgang Schauble.
The Portuguese people have put up with one draconian package after another – with longer working hours, 7pc pay cuts, tax rises, an erosion of pensions, etc – all amounting to a net fiscal squeeze of 10.4 of GDP so far in cyclically-adjusted terms. (It will ultimately be 15pc).
They have protested peacefully, in marked contrast to the Greeks, even though the latest poll by the Catholic University shows that 87pc are losing faith in Portugal’s democracy.
Yet Mr Passos Coelho’s rash decision to raise the Social Security tax on workers’ pay from 11pc to 18pc has at last brought the heavens down upon his head.
He was hauled in front of the Council of State – a sort of Privy Council of elders and wise men – for a showdown over the weekend. Eight hours later he emerged battered and bruised to admit defeat. The measure will not go ahead.
Francisco Louca from left-wing Bloco suggested that the prime minister cannot survive such a defeat. "The government is dead", he said.
I leave it to Portuguese readers to tell us on this blog whether that is so, but what is clear is that Portugal is entering an entirely new phase of this crisis.
There are bigger forces than governments. Mr Passos Coelho and his young puppies have come face to face with the Portuguese nation.
Unemployment has reached 15.7pc (36.4pc for youth). Citigroup expects the economy to contract by 3.8pc this year, a further 5.7pc next year, and yet again by 1.3pc in 2014. (and even then the current account will still be deficit – proof of the absurdity of EMU)
Read more: http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100020306/patience-snaps-in-portugal/
Premier Pedro Passos Coelho has gone beyond the demands of the EU-IMF Troika under the terms of Portugal’s €78bn loan package, winning plaudits from Europe’s austerity police and a pat on the head from Wolfgang Schauble.
The Portuguese people have put up with one draconian package after another – with longer working hours, 7pc pay cuts, tax rises, an erosion of pensions, etc – all amounting to a net fiscal squeeze of 10.4 of GDP so far in cyclically-adjusted terms. (It will ultimately be 15pc).
They have protested peacefully, in marked contrast to the Greeks, even though the latest poll by the Catholic University shows that 87pc are losing faith in Portugal’s democracy.
Yet Mr Passos Coelho’s rash decision to raise the Social Security tax on workers’ pay from 11pc to 18pc has at last brought the heavens down upon his head.
He was hauled in front of the Council of State – a sort of Privy Council of elders and wise men – for a showdown over the weekend. Eight hours later he emerged battered and bruised to admit defeat. The measure will not go ahead.
Francisco Louca from left-wing Bloco suggested that the prime minister cannot survive such a defeat. "The government is dead", he said.
I leave it to Portuguese readers to tell us on this blog whether that is so, but what is clear is that Portugal is entering an entirely new phase of this crisis.
There are bigger forces than governments. Mr Passos Coelho and his young puppies have come face to face with the Portuguese nation.
Unemployment has reached 15.7pc (36.4pc for youth). Citigroup expects the economy to contract by 3.8pc this year, a further 5.7pc next year, and yet again by 1.3pc in 2014. (and even then the current account will still be deficit – proof of the absurdity of EMU)
Read more: http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100020306/patience-snaps-in-portugal/
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