Portugal not “submissive” to Europe, but “disorganised” says economist and former industry leader
Portugal’s political and economic elite are not prepared to take the risks and carry out the necessary structural reforms to achieve economic growth for the country.
This was the conclusion from the respected Portuguese economist Pedro Ferraz da Costa who addressed members of the British, German, Belgium-Luxemburg chambers of commerce and Anje (National Association of Young Entrepreneurs) in Lisbon on May 21.
In a BP sponsored debate spearheaded by the British-Portuguese Chamber of Commerce, and which included the former leader of one of Portugal’s largest unions, the CGTP (General Confederation of Portuguese Workers), Manuel Carvalho da Silva, Dr. Ferraz da Costa said that the problem of successive Portuguese governments and economic elites was that they were “disorganised” and “left budgetary problems to fester until the country had “a rope around its neck” before reacting.
“In Portugal we’ve never been able to focus on a few select key objectives and I have no doubts that the budgetary problems we had was because the Government didn’t have a long-term plan, didn’t react to problems at they arose, and only did so when we were in a serious mess” said Ferraz, the former president of the Portuguese Confederation of Industry (CIP).
In a heated debate moderated by business daily Jornal de Negócios journalist Helena Garrido, Dr. Carvalho da Silva, who recently pulled out as a candidate for the Portuguese presidential election race, said that relations between capital and labour had become “disturbingly unbalanced in recent years.”
The former communist party member said that transfers of power to Brussels had only resulted in “precarious work and an unmotivated workforce, especially for young people”.
The academic and union leader said that Portugal was “operating short-term contingency and emergency policies and running the risk of these emergency policies becoming structured into the overall economic model and therefore the norm.”
Carvalho da Silva wondered what kind of future Portugal was building when up to 80% of its potential young workforce was seriously contemplating emigrating and taking their skills overseas.
The European Union, he said, was full of dichotomies, one in which the stronger countries economically were imposing conditions on the peripheral and weaker economies such as Portugal and which would leave very little room for their growth.
In other words, the union leader was saying that a two-tier system had been created whereby the economically powerful countries like Germany and France called the shots and made the weaker economies, like Portugal, submissive.
Pedro Ferraz da Costa said it wasn’t a question of being “submissive” or the European Union being “at fault”; it was a question of “Portugal being disorganised”.
Other small countries like Denmark and Holland or peripheral countries like Finland had succeeded in restructuring their economies to make them more dynamic, prosperous and capable of attracting investment and competing in international markets.
The economist then slammed Portugal’s hopelessly high and complicated corporation tax system which did little to attract multinationals to invest in the country.
“The tax system is completely indifferent to investment attraction. Ireland, for example, managed to go through a period of economic and financial readjustment (troika) and preserve a decent tax rate which is competitive. It is not difficult to see why internationally they have attracted investment,” he argued.
“No one in Portugal wants to take the risks to grow. No one is prepared, either from the left or the right, to do what is necessary to achieve the goal of growth if it means accepting rules that are somewhat different,” he added, referring to the fear of Portugal’s political and economic class to tackle entrenched but outdated lobbies of influence, interest and consensus.
“They all have a horror of change, to organise themselves mentally to confront whatever problems and obstacles that do exist but don’t exist in our vocabulary. The banks are not prepared to help, the bureaucracy and tax system are not at all prepared to collaborate to this end to encourage Small and Medium sized companies to grow into larger companies,” he added.
Manuel Carvalho da Silva said that the position of Europe within the world economic context was “old and very backward” and one of the greatest stumbling blocks to economic growth and development.
He argued that the financial system in Portugal was not at all consolidated, the 25 billion euros from the EU could not meet the needs of the Portuguese economy and had led to a “position of submission and abandonment”.
“How do we structure a new consensus and a new deal?” he asked. A new economic deal which favoured growth and development had to be built around the framework of a new political deal, one based on valuing work, rebuilding the middle classes in Portuguese society and which has so much to do with its fabric of small and medium size companies, he said.
Pedro Ferraz da Costa pointed out that Europe lacked innovation and had ceased to be a space for innovation for over a decade.
All of the money generated by Europe and its companies was invested in the Far East, benefitting these countries where there were better conditions, while Portugal did unbelievable things like give up its fishing and agriculture and traditional means to wealth creation.
Portugal’s government was unable to focus. Its trade promotion organisations like AICEP “instead of having three or five main objectives, has 30 major objectives because we haven’t got the courage to say “No!” to the other 25 that are good for nothing!” he added.
“No one wants to accept responsibility for inevitable costs; to prepare economic policy well in advance. We can’t leave it to Europe to sort out our problems, these are our problems and we have to sort them out ourselves.
“We cannot have an autonomous policy without having a responsible budgetary policy and if we think Europe is going to make life easier for us then that is an illusion,” he continued.
The economist then criticised the State, Bank of Portugal and the Ministry of Finance, which should have had central roles in running the economy, for poor supervision, failing to pick up and deal with major problems within the banking system while privatising public companies and trying to cover up huge financial holes and pretend they didn’t exist.
“We left things to drag on in Portugal until the financial system reached breaking point and yet Bank of Portugal didn’t catch a single problem. The banking sector, which is very important for the economy, has never been sorted out,” he concluded.
Both speakers also agreed that there needed to be a major rethink in Europe and Portugal on the number of hours employees worked, arguing that there wasn’t sufficient production to justify an eight-hour working day – an issue that would be very much on the table in the future.