Portuguese prime minister António Costa is confident he can roll back austerity without entering into conflict with other European Union countries.
The Socialist Party leader, who governs at the head of an unprecedented left-wing coalition with the anticapitalist Left Bloc, Communists and Greens, told the Financial Times that his 2016 budget proposal, submitted to the European Commission this weekend, is “proof” that fiscal consolidation need not entail punishing austerity measures.
“The fact is that while laying the foundation for more jobs, higher growth and better social protection, this budget goes further in reducing the deficit than set out in our government program,” Costa said.
His spending plans would keep Portugal’s deficit under the 3-percent ceiling agreed with other eurozone nations.
Costa rejected criticism that some of his first acts since coming power in November have weakened Portugal’s competitiveness.
“It’s completely wrong to think that a European country like Portugal could become more competitive on the basis of third-world competitiveness factors,” he said.
Among his priorities are decreasing working hours, lifting the minimum wage, removing extraordinary tax increases and reversing wage cuts in the public sector.
“The idea that productivity goes up due to the number of hours worked gives people the wrong incentive,” according to Costa. “It has to be done by increasing the value of the goods and services we produce.”
Right-wing parties that lost their majority in October avoided a Greek-style standoff with the rest of the European Union by making deep spending cuts and liberalizing the economy. This allowed Portugal to exit its €79 billion bailout program ahead of schedule.
The policies also helped bring down unemployment from a 17-percent high in 2013 and saw growth return last year after a deep contraction that lasted from 2011 to the end of 2014.
But youth unemployment, at 33 percent, has barely moved in the last two years and many families are still worse off as a result of pension and public-sector pay cuts.