Portugal: the impact of ‘anti-crises measures’ and the socio-economic situation

José Castro CaldasCentro de Estudos Sociais

Universidade de Coimbra

The three stages of the crisesThe financial stage (Mar. 2008 – Dec. 2008)

Main concern: stability of the financial system

The three stages of the crisisThe economic stage (Dec. 2008 – Feb. 2010)

Main concern: recession

The three stages of the crisesThe fiscal stage (Feb. 2010 - present)

Main concern: Stability of the euro

Anti-crisis measures in Portugal: stage I• Third quarter 2008: “Iniciativa de

Reforço da Estabilidade Financeira, IREF)”:• Acountability of financian institutions• Deposit garanties• State garanties to banks

Anti-crisis measures in Portugal: stage II• Jan. 2009: “Iniciativa para o

Investimento e o Emprego” (anti-cyclical, expancionay measures, 0,8 % GDP):• (Fiscal) support to home owners;• Anti-poverty allowances• Family allowances• (Fiscal) support to firms• Rehabilitation of public schools• Technologic infrastructure• Financial support to exporting SME• Emplument

Anti-crisis measures in Portugal: stage III• Mar. 2010: PEC I• May. 2010: PEC II• Sep. 2010: PEC III• Mar. 2011: PEC IV (rejected,

government resigns) • Apr. 2011: IMF/EU/ECB

Memorandum • June 2011: Elections (new majority)

Anti-crisis measures in Portugal: stage III• Fiscal consolidation:

– Increase tax revenue: tax rates, special income taxes, tax benefits

– Reduce public spending: cuts in public servant payroll, decrease pensions, increase public services access rates and regional coverage

• Privatization• Structural adjustment:

– Reduce unemployment benefits, generalize means testing, flexibilise labor legislation

The impact of anti-crisis measures (cyclical)

Trend 1: High public deficit

Trend 1: High Public Deficit

Trend 2: Increasing Public Debt

Trend 2: Increasing Public Debt

Trend 3: escalating unemployment

Trend 4: Decrease of the n. of people with access to protection

Trend 5: Increasing inequalities

Social Europe, 2011, The Distributional Effects of Austerity

Measures: a comparison of Six Countries, Research Note 2/2011

Trend 6: Delegitimisation of democratic rule• Opinion Poll Februray 2012:

– 62% (32 % in >September) desaprove the government

– 73% “there is no better alternative”– 40% “austerity will not solve the

problem”

Conclusion

• The scenario inscribed in these trends:

– Deep recession compromising the objectives of deficit and debt containment, and precipitating an unprecedented social crisis.

– Political or democratic representation

crisis with unpredictable consequences .