Austerity paves way for growth in Portugal | News | DW | 23.02.2015
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Austerity paves way for growth in Portugal

Portugal's austerity policies have helped turn the country around - and there are good economic signs ahead. But aid groups and unions say this progress has come at a high social price for the country's poor.

Not even the Portuguese agree on the gravity of their situation: On the one hand, the government and many economists are saying the worst is over. On the other, social workers and representatives of almost all aid organizations believe that at the very least the social effects of the crisis will worsen considerably.

Again and again, the government brings up its early repayment of a portion of the bailout loans and record low interest rates for the issuance of government bonds, as well as the relatively low official unemployment rate of 14 percent. But these numbers should be treated with skepticism, warns Joao de Sousa of AMI, a charity. He said the unemployment statistics in Portugal are kept down by training courses that serve no other purpose, while many jobseekers, in their despair, have simply not signed up with the employment agencies. The largest Portuguese trade union federation, the CGTP, thus estimates real unemployment at over 25 percent, added to which are numerous ostensibly self-employed people who earn next to nothing.

Poverty all around

Joao de Sousa of AMI

Joao de Sousa says his charity struggles to feed the poor...

Even those who are in work have nothing to laugh about: The statutory minimum wage of around 430 euros per month is the exception rather than the rule. Workers in Portugal's strongest export industries - textiles and shoes - must somehow make ends meet on this meager income. It's no wonder that, according to the latest figures from the national statistics office, the number of poor has risen to 19 percent of the country's population. About 2 million of 10 million Portuguese are forced to get by on less than 60 percent of the average wage. De Sousa says Portugal's generous social-security network was almost completely destroyed by austerity measures - something he calls "disastrous."

AMI soup kitchen in Porto

...such as in its Porto soup kitchen

"The social problems that the austerity policies brought with them are far from being solved," economics professor Aurora Teixeira of the University of Porto said. The government had been able to draw up an acceptable budget, she said, through longer working hours, wage cuts and reductions in government spending that had finally allowed the economy to see a light at the end of the tunnel. But the unprecedented decline in social spending that occurred hit the most vulnerable particularly hard.

Half-full or half-empty?

"We have reached our limits," de Sousa said, shrugging. He said AMI's soup kitchen in Portugal's second largest city, Porto, was hopelessly overburdened. Rice, potatoes and canned goods were no longer sufficient to meet the increased demand for food that the charity distributes to the needy once a month. In the capital, Lisbon, and other cities, it was no different. He said it was clear the crisis was far from over.

Portugal lived beyond its means, spending far more than it took in, Teixeira said. But that has now changed. Setting aside debt service, the budget now even shows a clear surplus. Austerity, she said, had thus been successful: "There is hope again. The worst is over."

But, she said, what was missing were structural changes: Portugal had to increase the quantity and quality of its economic output to increase the flow of money into the country, and it should not concentrate only on services such as tourism. She did not say how this could be brought about.

In or out

And because they are either poorly paid, or unable to get a steady job, increasing numbers of well-educated young Portuguese are going abroad. More than 100,000 each year have turned their backs on their homeland since the crisis began, emigrating to Britain, France or Germany. This is especially true of those with higher education such as engineers and economists, but also skilled workers and nurses.

Guadalupe Simoes

Union official Guadalupe Simoes says budget cuts have taken their toll on healthcare

Guadalupe Simoes of the nurses' union said spending cuts mean Portuguese state-run clinics and hospitals are now chronically understaffed, and the staff underpaid. "I can understand that young, university-educated people do not want to work for 700 euros on temporary contracts, if they can find a job at all. So go more and more will go abroad." Those staying behind are the poor and elderly - and their already modest medical care will continue to face cutbacks due to the austerity measures, Simoes said.

An end in sight

But it was exactly these austerity measures that regained the market's confidence in Portugal, Teixeira said. The country was therefore now able to borrow money at low interest rates of just over 2 percent and even repay a portion of its bailout debt ahead of schedule.

"This gives the government more room to maneuver," Teixeira said. "It can set independent political priorities."

There are already initial signs that austerity will end soon: The government has rolled back some wage cuts, and other measures are likely to follow. Ultimately, 2015 is an election year in Portugal. And the people have suffered long enough.

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