Portugal Economy Sinks, State Clings to Bailout’s Austerity Terms
Wouter De Broeck: Creditors breathe a sigh a relief and ordinary people pay big price over deal, while no political party is seen as credible before discontent voters
JESSICA DESVARIEUX, TRNN PRODUCER: Welcome to The Real News Network. I’m Jessica Desvarieux in Baltimore.
On Sunday, Portugal’s president said he would not be calling for early elections. That means that he will be sticking to the E.U.-IMF $100 billion bailout. This translates into lowering the country’s borrowing rate, and it provides relief for international creditors. But what will this mean for ordinary people?
Here to get into the details is Wouter De Broeck. Wouter is a freelance journalist who has been living in Portugal since 2009. Currently his work focuses on problems of ordinary people in Portugal and Spain as a consequence of the economic crisis.
Thanks for joining us, Wouter.
So, Wouter, my first question is: can you just provide us some background? Just get us up to speed. What has been happening in Portugal over the past three years?
WOUTER DE BROECK, JOURNALIST: Basically the crisis didn’t start at exactly–in May 2011 when the bailout was [incompr.] People already were suffering from–there were low wages.
So since then, yeah, there has been a huge wage cuts, and also cuts on pensions, social benefits. So, yeah, people actually started to feel those cuts about, let’s say, early 2012. And the economy itself has been severely affected that Portugal is in a recession since three years. We are in the third year now. And the outlook for 2014 is also very poor. So, yes, the effects on the real economy has been huge so far.
DESVARIEUX: Okay. And it’s not just the economy. You can see the effects of it. And even in a 2011 study by the European Commission, they found that the austerity policies were, quote, clearly regressive, meaning low-income people lost a disproportionate amount of their wealth. Can you just talk about some of the stories that you hear on the ground? How is this affecting people on a day-to-day basis?
DE BROECK: Yeah, let’s say that’s what I hear the most is that one of the effects of austerity is mass unemployment. Portugal at this moment has a rate of almost 20 percent unemployment. In–let’s say in practical life that means that lots of young people that maybe just rented or bought a house cannot afford it anymore, have to–and in lots of cases they have to go back to their parents and live with their parents. And what I hear is that at this moment, let’s say, the social stability factor in Portugal is, yeah, in the income of the elderly people. So most of the people are depending on the retirement pension or an income of their father or mother. And there is also a part of, let’s say, that can survive by doing things in a parallel economy. But that has been the most visible. I would say that at the same time, because elderly people have a very difficult time because they have cut back pensions. Even before the crisis started, the lowest pensions in Portugal were sometimes not even EUR 300. The lowest pensions were frozen. They were–they–in fact, that mean that they were losing money and they were being [incompr.] from 6 to 23 percent on basic needs like electricity. That kind of things affect very much the life of a, let’s say, normal family.
DESVARIEUX: Okay. But not everyone is hurting, and certainly not everyone is hurting equally. Who is actually to gain? Who has something to gain in these austerity policies?
DE BROECK: Let’s say that when we hear the rhetoric of the politicians, they’re saying we have to pay our debt and we have lived above our standards. But actually who are we paying to is [incompr.] the so-called creditors that are giving money in most of the cases are banks that are, you know, banks, European banks that can loan, let’s say, very, very cheap with the ECB, but then loan to the Portuguese government for rates that are very much higher. So in fact people, normal people with these cuts are paying, most of the time, interest rates. And so, you know, when you ask me who’s benefiting, let’s say the balance sheets of banks, I guess.
DESVARIEUX: Would we say German banks in particular?
DE BROECK: I wouldn’t point only at the German banks. There is lots of European banks who have interest in–who have, yeah, bought southern European debt paper. But, yeah, okay, there’s lots of German banks as well.
DESVARIEUX: According to a 2012 study by the consultancy firm Accenture, they say that Portugal has the highest inequality in the Western Europe. How has Portugal’s austerity policy affected these numbers? And in your opinion, was this structure already there in place? Or we’ve just seen this, just this boom since the austerity?
DE BROECK: No. Let’s say that Portugal economy was already very weak before the crisis started. Portugal has got a so-called lost decade between 2000 and 2010 and mainly, let’s say, was working under low–let’s say, on the basis of a low-wages economy. And Portugal suffered a lot with industries [incompr.] such as textile, who are delocating from here. So let’s say German, French brands who were working here, they moved out to China, Turkey. That were problems before the crisis, but they were, let’s say, emphasized by them. Let’s say people who were already suffer or cities who were already suffering with unemployment only got worse, because there was no alternative for this low-wage economy. And the irony of the austerity is that it’s pushing Portugal back in such a low-wage economy, and it hasn’t got any perspective of, let’s say, producing any–let’s say, this kind of scheme, doing any–let’s say, getting back on its feet.
DESVARIEUX: Okay. How much have wages actually declined?
DE BROECK: I’ve been looking at some numbers. It’s hard to say. But they have–let’s say the average minimum wage in Portugal is EUR 485 a month. That’s a minimum salary. Lots of employers are not paying this. But this amount has been steady for the last three years at least. How much the average salary has declined I don’t know because there has been so much cuts on civil servants or on normal salaries. But I would say something between 15 to 20 percent [incompr.]
DESVARIEUX: Okay. You mentioned this earlier, that the politicians have been espousing this rhetoric about how they sort of have to get their house in order financially, their fiscal house in order. Can you speak more about this, elaborate more on this point that you brought up about some of the winners and the losers in all this? Do you see democracy being a loser in all this?
DE BROECK: Yeah, because we had–the past three weeks we had a very, very strange kind of crisis, with two ministers going away and then one minister coming back, and at the end, as you said at the beginning of the program, the president saying that there was no elections to come and that the same government would continue. And as a result of this, people are losing their faith in the political class as a whole. So there–when I talk to people, they say–even, let’s say, well-educated people, well-informed people, they say, I cannot vote anymore because I just don’t believe them anymore and there’s no alternative. And even the minor parties on the left side have not–were not able to build up some credibility. So if you would say democracy is one of the victims of austerity, I would say yes.
DESVARIEUX: Okay. Thanks so much for joining us, Wouter.
DE BROECK: A pleasure.
DESVARIEUX: And thank you for joining us on The Real News Network.
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