THE RETURN OF FULL EMPLOYMENT IN PORTUGAL
A rising minimum wage, a tax on high turnover, an increase in pensions... Lisbon dares to go against the economic dogma of the EU. 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 of. It would seem that the dogma of austerity, touted by the European Union (EU) as the only viable economic option. is being seriously questioned.
With the unemployment rate steadily declining since November 2015Portugal, which was on the brink of economic collapse just a few years ago, is now more than just getting back on its feet. It is now more than just raising its head. It can even look down on its neighbors, first and foremost France. While the unemployment rate peaked at 17.5% in early 2013. It is now only 7.9% at the beginning of 2018, that is, below the 8.9% posted by France.
Portugal, a good student in the euro zone
Did the Portuguese, as good European students, agree to a freeze or a decrease in their salaries to get back to work? Quite the contrary. The minimum wage was increased from 530€ to 557€ in 2017 and is to be raised to 600€ in 2019. Would Lisbon then have followed the French and German example in relieving corporate taxation? Again, not at all: the Portuguese government has, for example, created a tax for all companies with a turnover of over €35 million.
In fact, on many points. Portugal's economic policy is the complete opposite of the one recommended by Brussels and applied by Berlin or Paris for several years. Portugal's 2018 budget thus provides for an increase in retirement pensions. A program to enhance the value of 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 in particular on lowering salaries and drastically reducing social spending. Portugal thus seems to be contradicting all the European lessons in economic matters.
Why Portugal's success is not inspiring Brussels
Antonio Costa's left-wing government can claim to have 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? Probably because it demonstrates that recovery policies. A concept that has become almost taboo in Europe, can indeed bear fruit. They are based on a simple idea. Stimulate consumption by improving salaries and thus fill the order books of companies. With positive effects for investment and productivity.
While many European governments are committed to the liberal and austerity dogma demand sacrifices from their citizens with the promised results still eluding us, it is easy to understand the lack of enthusiasm for the policy choices of Antonio Costa's government on the part of the right-wing opposition, which supports the European austerity policy. The Portuguese Prime Minister has not hesitated to attack head-on the line once taken by the right. In line with EU expectations: "The austerity policy followed in recent years has resulted in an unprecedented increase 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 irritates the Brussels authorities even more. The Commission also considers that Portugal's 2018 budget does not meet the European requirements for reducing public spending. Set at 0.6%, since it would only allow a reduction of... 0.4%. The EU does not seem to like the fact that Portugal has disproved the Brussels mantra that only a reduction in public spending can reduce the budget deficit. By demonstrating that a demand-side policy is capable of triggering a virtuous circle leading to an increase in government revenues, Lisbon is challenging the very foundations of an economic dogma that the EU is determined to believe is set in stone, unless it is its own DNA.
A very European paradox. The two most zealous defenders of the Brussels economic doctrine, Berlin and Paris, are far from the best positioned to lead the way. With growth slowing, consumption down, and investment down in the first quarter of 2018. France and Germany may be less sure of themselves. And yet, the German model still enjoys exceptional publicity throughout Europe.
