THE RETURN OF FULL EMPLOYMENT IN PORTUGAL
Rising minimum wage, tax on big business, pension increases... Lisbon dares to go against the grain of EU economic dogma. And much to the chagrin of austerity advocates, this policy is bearing fruit.
Would there be, in front of to the famous German modela Portuguese counter-model? Judging by the excellent figures Lisbon can boast. It would seem that the dogma of austerity, touted by the European Union (EU) as the only viable economic option. is being seriously called into question.
With the unemployment rate steadily declining since November 2015Just a few years ago, Portugal was on the brink of economic collapse. Now, it is more than just raising its head. It can even look down on its neighbors, chief among them France. Unemployment peaked at 17.5% in early 2013. It now stands at just 7.9% at the start of 2018, i.e. below the 8.9% posted by France.
Portugal, a good student in the euro zone
Have the Portuguese, like good European students, agreed to a wage freeze or cut in order to get back to work? Quite the contrary. The minimum wage was increased from 530€ to 557€ in 2017 and is due to rise to 600€ in 2019. Would Lisbon then have followed the French and German example in easing corporate taxation? Again, not at all: the Portuguese government has, for example, created a tax for all companies with sales in excess of €35 million.
In fact, in many respects. Portugal's economic policy runs completely counter to that recommended by Brussels and applied by Berlin and Paris for several years. Portugal's 2018 budget, for example, provides for an increase in retirement pensions. A program to upgrade the civil service or even. Far from the trickle-down theory, a tax cut for the middle classes. While Brussels theorizes and imposes a doctrine of austerity based on wage cuts and drastically reduced social spending. Portugal thus seems to be contradicting all European economic lessons.
Why Portugal's success is not inspiring Brussels
Antonio Costa's left-wing government has successfully implemented an ambitious economic policy. So why is the Portuguese model so little praised in the EU and so little reported in the press? No doubt because it demonstrates that recovery policies. A concept that has become almost taboo in Europe, can indeed bear fruit. These policies are based on a simple idea. Stimulate consumption by raising wages, thus filling companies' order books. With positive effects for investment and productivity.
While many European governments are committed to the liberal and austerity dogma demand sacrifices from their citizens whose promised results have yet to materialize, it is easy to understand the lack of enthusiasm for Antonio Costa's government's political choices on the part of the right-wing opposition, which supports the policy of European austerity. Indeed, the Portuguese Prime Minister does not hesitate to attack head-on the line once followed by the right. In line with EU expectations: "The austerity policy pursued in recent years has resulted in an unprecedented rise in unemployment, with devastating social effects on young people and the least qualified citizens. As well as the families and thousands of unemployed Portuguese: it has also been associated with a devaluation of the dignity of work and workers' rights."
The austerity policy has resulted in an unprecedented increase in unemployment with devastating social effects
This unorthodox policy is all the more irritating for the authorities in Brussels. In fact, the Commission considers that Portugal's 2018 budget does not meet European requirements for reducing public spending. Set at 0.6%, it would only allow a reduction of... 0.4%. The EU seems to have a hard time digesting the fact that Portugal has given the lie to the Brussels mantra that the only way to reduce the budget deficit is to cut public spending. By demonstrating that a demand-side policy is capable of triggering a virtuous circle leading to increased government revenues, Lisbon is challenging the very foundations of an economic dogma that the EU is determined to believe is set in stone - or is it its very DNA?
A very European paradox. The two most zealous defenders of the Brussels economic doctrine, Berlin and Parisare far from the best placed to lead the way. With growth slowing down, consumption declining and investments lower in the first quarter of 2018. France and Germany may be less sure of themselves. And yet, the German model is still enjoying exceptional publicity throughout Europe.
