Troika offers some breathing space, for more austerity

Published on 12 September 2012 at 11:20


Portugal has discovered it will be even more out pocket in 2013 than 2012. As the EU/ECB/IMF troika grants Lisbon one more year to meet its 3% deficit target, the government has been busy launching new austerity measures.

On September 7, PM Pedro Passos Coelho surprised everyone by announcing a 7% increase in the employee social security contributions, while companies will enjoy a reduction of 5.75%. Then on September 11, Finance Minister Vitor Gaspar added 13 new measures. Among them, a pension cut, accelerated cuts in the number of public employees, an income tax hike and a 1.1% rise in social security contribution for freelance workers.

For Público, these measures are —

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... two punches in the stomach in just five days that have caused deep damage. The climate of social and political disruption has been consolidated. (…) Once again, the country is walking over hot coals. We must realise that the spectre of bankruptcy and the tragic fate of Greece are still looming. To survive the storm, the government must renew the political and social pact and promote renewal. But above all it must eliminate, or at least mitigate, this virus that is the root of all problems — the absurd notion that workers should fund their own jobs by making contributions for employers.

Jornal de Negócios, for its part, denounces the successive mistakes of politicians "who sacrifice the country in order not to lose face, or elections" and argues that the government and the troika have failed —

The government got its predictions wrong, the economy will not shrink by 4% in two years, but by 6% in three years. The government flopped in its aim to reduce the budget deficit. Fortunately, we have won an extra year. But this isn’t the troika helping Portugal, it’s the troika helping the troika, which is co-responsible for the failure. If the troika was helping it would be something else: it would be lowering the interest rate charged to Portugal. If countries like Germany are now funded at rates close to 0%, why charge us almost 4%?

Diário de Notícias notes that

... five days ago the ECB was willing to support a return to the market for long term Portuguese bonds until September 2016 (...) but this will not serve to alleviate the impoverishment of the general population. (...) The government is calling on the Portuguese to make an effort to reduce the deficit "of around 4.9 billion euros", worth almost six times the required reduction agreed with the troika.

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