Portugal’s Despondency Likely to Endure

Portugal’s economic prospects are dire because the nation’s political system isn’t prepared to reform.

Portuguese politics can be called “traditional” but the term is used pejoratively.

As is the case in many Mediterranean countries, Portugal’s lack of a political culture and strong civil society have driven it to mismanage the political freedoms it acquired during the 1970s when the authoritarian government was replaced by a democratic one. Similarly, it failed to properly manage the financial backing it gained by joining the European single currency in the early 2000s.

One of the key features of the Portuguese system is the number of public functions which are subject to political nomination which implies that there is a great number of people whose jobs depend on a particular political party. This also means that every time the government changes, so does the leadership of many of the state’s agencies and not only is experience lost but political agendas are changed with ease. As a consequence, no thorough reforms are ever undertaken, let alone completed.

Political youth leagues abound in Portuguese politics since they are a pathway to a job and the former prime minister José Sócrates was a true product of Portugal’s system having been a member of both the main right of center party (PSD) and the left of center Partido Socialista. Having only barely obtained an engineering degree from a shady university, he had little experience outside of politics.

His stewardship of the Portuguese government was everything one would expect from a man of the system. Demagogy and populism were taken to unparalleled extremes and while the national debt spiraled out of control, his socialist administration made cultural issues like gay marriage and legal abortion its battle cry. With a compliant president and an absolute one-party majority in parliament, Sócrates managed to double what was already a bloated public debt. The reforms he enacted were few and without substance.

Portugal’s political left is far from the only one to succumb to populism but given the fact that it was given a mandate to manage the Portuguese state for twelve of the past sixteen years — tragically also during the time in which most of the country’s manufacturing jobs were outsourced to Asia — the importance of this mismanagement reached new heights.

Sócrates’ socialist predecessor and now United Nations High Commissioner for Refugees António Guterres, implemented numerous welfare and health-care programs that Portugal could ill afford as its economy stagnated — although statistically, Portugal boasted one of the best health-care systems among industrialized nations — and Sócrates’ immediate conservative predecessor, the incumbent president of the European Commission, José Manuel Barroso, lacked a parliamentary majority as well as the political courage to both implement reforms and cut spending. His government didn’t last long.

Unlike Sócrates, Portugal’s new leader, Pedro Passos Coelho, is a conservative and doesn’t try to divert the country’s attention from its debt and deficit problems. However in following with the best populist tradition, he does so knowing that his popularity depends on his image as an austere financial manager. When a few years ago he ran for the leadership of Portugal’s now ruling party, his platform was that of a classical economic conservative (neoliberal) but also a socially liberal one. He lost those elections but adapted quickly. When he gained the premiership, he did so having ran as almost a Christian Democrat.

Passos Coelho is a pragmatist. With a comfortable coalition majority in parliament and an opposition socialist party that’s being led by a member of its left wing, his first mandate is almost certain to go smoothly. If European and international policy demands are met, it also ominously means that no serious reforms are likely to be undertaken.

When Passos Coelho ran for the leadership of the Social Democratic Party, the candidate he lost against was a conservative former education and finance minister. She wasn’t of the adaptable kind. When she campaigned against Sócrates in 2009, she did not hide her social conservative views but also made it a point not to make promises and to denounce as much as possible the severe financial situation which the country was in.

Sócrates in his turn promised a new airport, high speed railways and the preservation of the social security system. Portuguese voters chose his promises over a reality check just as they had done in previous years by electing politicians who gave them one of the best highway systems in Europe — and one of the most underused — instead of voting for painful reforms. Cement, of course, is much more real than abstract efficiency.

An added factor was the contrast between PSD’s former leader’s and both Passos Coelho’s and Sócrates’ relationship with the media — the former loathed their sensationalism; the latter tried to use it as much as they could.

It is true that Portugal’s problems are structural and that leadership will not be that preponderant in the long term but with the prospect of Portugal’s presidency being occupied by inept former prime ministers as Guterres or Barroso and Prime Minister Passos Coelho ruling as a wind sack for the time being, the future doesn’t look bright.

Finally, the paradox that more government and ever higher tax rates have only ever resulted in sluggish growth and contributed to more indebtedness was always lost on the Portuguese left. While the delocalization of European industry to Eastern Europe and Asia, North Africa and beyond was not Portugal’s fault, the rise in the fiscal burden was.

In spite of the slight depression that the current financial crisis has caused in Portugal, the export sector is still expanding, in large part thanks to Lisbon’s proximity to the Angolan, Brazilian and other former colonial markets. However, even Portuguese companies will think twice before reinvesting their overseas profits at home if the overly bureaucratic and slow judicial system isn’t reformed and tax rates remain high.

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