FT: Surprise poll bounce-back for Portugal PM

(No plus side to this one, only frustration, get real PSD and get moving. Embarassing to think the key responsible can get re-elected-Sara)

The centre-left Socialists of José Sócrates, Portugal’s caretaker prime minister, have leapt forward in an opinion poll to overtake the main opposition party six weeks ahead of a snap election. According to the Marktest poll published on Thursday, the party has gained 11.5 percentage points over the past month to poll 36 per cent of voting intentions against 35 per cent for the centre-right Social Democrats (PSD), whose share fell by 12 points.

The poll comes a month after the PSD and other opposition parties voted down a government austerity package, forcing Mr Sócrates to resign and triggering an early election on June 5.The political crisis aggravated the country’s sovereign debt difficulties, causing Mr Sócrates to submit a formal request for a European Union-led bail-out two weeks ago, making Portugal the third eurozone member after Greece and Ireland to seek a financial rescue.

TSF radio, one of the media groups that commissioned the poll, described the gain by the Socialists as a “historic recovery”.
The PSD, which Mr Sócrates blames for the political crisis and the bail-out, had previously enjoyed a strong lead in the polls. Since last September it had been consistently forecast to win an overall majority in parliament in coalition with the Popular party (CDS-PP), a small conservative group.
According to Thursday’s poll, however, neither a coalition of these two parties nor the Socialists would win an overall majority in parliament, raising the possibility of further political uncertainty after the June election.

In a separate poll for the Diário Económico newspaper earlier this week, 71 per cent of people surveyed said it was “very important” that Portugal had a majority government after the election. For the past two years, the Socialists have governed with a minority that can be defeated by the combined votes of the opposition.
According to the Diário Económico poll, almost 65 per cent of those questioned blamed Mr Sócrates most for the crisis and 58 per cent said the PSD should be part of the next government.

Pedro Passos Coelho, the PSD leader, has said he would be prepared to form a coalition with the Socialists, but not while Mr Sócrates was the party’s leader. However, more than 97 per cent of delegates to a Socialist party conference two weeks ago backed Mr Sócrates as their leader and candidate for re-election as prime minister.

In an editorial on Thursday, the Público newspaper said crises within the two main political parties and their failure to reach compromise agreements with each other were the main causes of Portugal’s political and economic difficulties.
The Socialists had closed ranks behind Mr Sócrates and “obliterated internal debate”, the paper said. Conversely, internal divisions within the PSD and a series of “own goals” were threatening what should be “an easy election victory” for the centre-right party.

http://www.ft.com/cms/s/0/93c8ae48-6bfa-11e0-b36e-00144feab49a.html#ixzz1KAD1bYNM

Diario Economico: Opposition Leader says limited room for maneuvre

Passos Coelho, the PSD leader, said this morning in a forum that he expects a 4 year package with further austerity measures for the state
Pedro Passos Coelho has admitted this morning that the country has a limited bargaining room with the troika, given the package needs to be closed by early May. "The margin to negotiate is very small. Portugal should have asked for help earlier.", said the PSD leader. "Austerity can not be for the people, it must be for the State now", is one of the principles, explained Pedro Passos Coelho, at the moment sitting with the IMF, ECB and the European Commission.

Plan for Growth

The PSD commissioned a famous book that is meant to propose a plan for growth. Even though I bought 2 copies, I offered them both, so I am still restricted to the Visao article with the summary. I will start with that, and hopefully by Easter I will have recovered a copy.

I would like to start with Economic Diplomacy. All the way through the famous epic years of Portugal, we were kings of diplomacy with posts and representatives that fought for the interests of the Kindgom all over the place. Thanks to that, I am always proud to tell the story of how the Portuguese introduced the tea in England. However, those times are gone and it is time we keep up with current times diplomacy

Here are some of the book recommendations:
1. Hire a super salesman, ex-top executive, that is in charge of attracting foreign investment into Portugal, across multiple sectors and ministries - agree, I can not say enough how Portugal is bad at selling itself, maybe if someone has a full time job of doing it and gets paid for it, we can bring back the long lost investment
2. Create a PALOP (Portuguese Speaking Countries) dedicated office - what, there is none?
3. Crete a SME dedicated office - again, there is none?
4. Use state visits and high end diplomacy in opening up new markets for Portugal - I wonder what exactly this one means
5. Focus on the concept "Lisbon, European capital for business" - indeed, Lisbon keeps being out of the European cities circuit and I wonder why. It can not just be the geographic locations. A dedicated team should ensure there is focus on the business aspect, conferences, hotels, flights, tax breaks all that is required to make it an appealing place to do business. The sun is there already, we lack the rest
6. Choose ambassadors that have a business profile and provide them with training about the economic situation of the country - again, I do not know what to say. It does not occur to me that even today any representative of the country would not have this type of requirements. But if not then, then please do impose this!

I have to say, the measures above are but half of the ones presented in the article, and probably much less than in the book itself, but they have one thing that I like - consistency - and one thing that I dislike - they are not in place yet. The other common factor is that they seem to be easy enough to implement. It is not the same as when we go speak about reforming justice or the labour law...

NY Times: Portugal’s Unnecessary Bailout

PORTUGAL’S plea for help with its debts from the International Monetary Fund and the European Union last week should be a warning to democracies everywhere.

The crisis that began with the bailouts of Greece and Ireland last year has taken an ugly turn. However, this third national request for a bailout is not really about debt. Portugal had strong economic performance in the 1990s and was managing its recovery from the global recession better than several other countries in Europe, but it has come under unfair and arbitrary pressure from bond traders, speculators and credit rating analysts who, for short-sighted or ideological reasons, have now managed to drive out one democratically elected administration and potentially tie the hands of the next one.

If left unregulated, these market forces threaten to eclipse the capacity of democratic governments — perhaps even America’s — to make their own choices about taxes and spending.

Portugal’s difficulties admittedly resemble those of Greece and Ireland: for all three countries, adoption of the euro a decade ago meant they had to cede control over their monetary policy, and a sudden increase in the risk premiums that bond markets assigned to their sovereign debt was the immediate trigger for the bailout requests.

But in Greece and Ireland the verdict of the markets reflected deep and easily identifiable economic problems. Portugal’s crisis is thoroughly different; there was not a genuine underlying crisis. The economic institutions and policies in Portugal that some financial analysts see as hopelessly flawed had achieved notable successes before this Iberian nation of 10 million was subjected to successive waves of attack by bond traders.

Market contagion and rating downgrades, starting when the magnitude of Greece’s difficulties surfaced in early 2010, have become a self-fulfilling prophecy: by raising Portugal’s borrowing costs to unsustainable levels, the rating agencies forced it to seek a bailout. The bailout has empowered those “rescuing” Portugal to push for unpopular austerity policies affecting recipients of student loans, retirement pensions, poverty relief and public salaries of all kinds.

The crisis is not of Portugal’s doing. Its accumulated debt is well below the level of nations like Italy that have not been subject to such devastating assessments. Its budget deficit is lower than that of several other European countries and has been falling quickly as a result of government efforts.

And what of the country’s growth prospects, which analysts conventionally assume to be dismal? In the first quarter of 2010, before markets pushed the interest rates on Portuguese bonds upward, the country had one of the best rates of economic recovery in the European Union. On a number of measures — industrial orders, entrepreneurial innovation, high-school achievement and export growth — Portugal has matched or even outpaced its neighbors in Southern and even Western Europe.

Why, then, has Portugal’s debt been downgraded and its economy pushed to the brink? There are two possible explanations. One is ideological skepticism of Portugal’s mixed-economy model, with its publicly supported loans to small businesses, alongside a few big state-owned companies and a robust welfare state. Market fundamentalists detest the Keynesian-style interventions in areas from Portugal’s housing policy — which averted a bubble and preserved the availability of low-cost urban rentals — to its income assistance for the poor.

A lack of historical perspective is another explanation. Portuguese living standards increased greatly in the 25 years after the democratic revolution of April 1974. In the 1990s labor productivity increased rapidly, private enterprises deepened capital investment with help from the government, and parties from both the center-right and center-left supported increases in social spending. By the century’s end the country had one of Europe’s lowest unemployment rates.
In fairness, the optimism of the 1990s gave rise to economic imbalances and excessive spending; skeptics of Portugal’s economic health point to its relative stagnation from 2000 to 2006. Even so, by the onset of the global financial crisis in 2007, the economy was again growing and joblessness was falling. The recession ended that recovery, but growth resumed in the second quarter of 2009, earlier than in other countries.

(...)

Could Europe have averted this bailout? The European Central Bank could have bought Portuguese bonds aggressively and headed off the latest panic. Regulation by the European Union and the United States of the process used by credit rating agencies to assess the creditworthiness of a country’s debt is also essential. By distorting market perceptions of Portugal’s stability, the rating agencies — whose role in fostering the subprime mortgage crisis in the United States has been amply documented — have undermined both its economic recovery and its political freedom.

In Portugal’s fate there lies a clear warning for other countries, the United States included. Portugal’s 1974 revolution inaugurated a wave of democratization that swept the globe. It is quite possible that 2011 will mark the start of a wave of encroachment on democracy by unregulated markets, with Spain, Italy or Belgium as the next potential victims.

(...)

Robert M. Fishman, professor of sociology at the University of Notre Dame
The New York Times, April 12, 2011

The third bail-out @ The Economist

IT MAY have been inevitable, but it was a sad moment for Portugal: Europe’s oldest nation state brought low. In a prime-time television address on April 6th, after months of denial, Portugal’s caretaker prime minister, José Sócrates (pictured), at last admitted what had long been obvious to everyone else: his country needed a rescue loan from the European Union.

Portugal now joins Greece and Ireland in the euro zone’s intensive-care ward. Its public debts are nowhere near as monumental as Greece’s; its banks not as reckless as Ireland’s. It has succumbed because of a humdrum failure to rein in wage increases and to modernise a bureaucracy schooled in tallying the quiet remains of the first global empire, as well as an inability to coax upstanding family companies, which for centuries have crafted textiles, ceramics and shoes, into competing with the Chinese. As a result, harsh as it may seem, a country whose collective memory is still scarred by the austerity demanded by the IMF in the early 1980s must once again subject itself to tough reforms demanded by foreigners.

(...)

But whether Portugal’s capitulation marks a turning point in the euro zone’s crisis depends at least as much on decisions in Brussels as on those in the Iberian peninsula. Getting Portugal’s reform package right is the priority. The country surely has some financial skeletons: countries that borrow so heavily while growing so slowly usually do. But its main problem is a lack of competitiveness—which suggests a greater need for structural reform than for austerity. So top billing should go to deregulating cosseted industries and reforming the labour market. Portugal, one of the rich world’s most rigid economies, must become one of the more flexible. Greece’s experience shows how hard this will be.

See full article at http://www.economist.com/node/18530121

FT: Drawing a line in the Iberian sand

(...) The caretaker government in Lisbon did nobody any favours by flipping from denying the need for a rescue loan one day to requesting one the next. Markets may have seen it as a fait accompli that Lisbon would eventually go cap in hand to the European financial stability facility: sovereign bond yields hardly moved on Thursday. But it further complicated a political challenge that was going to be hard enough as it was. Within Portugal, it is doubted whether the caretaker government – which lost a parliamentary vote of confidence last month – has the constitutional authority, let alone the political legitimacy, to commit the country to the kind of conditions a loan from the EFSF would entail. This is especially so since the political class has miserably failed to reach a consensus on the deficit-cutting measures the country can no longer delay. And Portugal’s eurozone partners will not find it politically possible – nor should they – to advance the funds without such conditionality, even if only to jump refinancing hurdles reached before a new government is elected in June. (...) For Portugal, that willingness is a bigger “if” than even for Greece. Lisbon has shown little appetite for the necessary belt-tightening and structural reforms of the economy to restore its long-lost ability to grow. The rest of Europe should be ready to extend rescue loans, but before it does so, it must demand that Portuguese politicians use the election campaign to seek a mandate from the people for a programme of reform. If this is achieved, and a loan is granted, all sides must accept that if the loan conditions are not met, aid will stop and a default triggered. Getting the Portuguese rescue right matters for all of Europe, and most of all for Spain. Madrid has done all that Lisbon has not: it has taken drastic measures to cut the deficit, embarked on reforms to make the economy more efficient, and spared no effort to communicate with bond investors. There is no solid reason why Portugal’s failure should reflect on Spain. Undeserved as this would be, however, it cannot be excluded. Spanish banks are overexposed to Portugal.

Today we start

After exchanging so many messages on the frustrating pieces of news that come out about Portugal, we decided that this needs to stop. Since yesterday that I thought of blogging about the current conditions, so today I guess I just had an incentive. We don't pretend to be better reporters, or better informed, we just pretend to write on the positive side, on all that was achieved, and even more, on the possibility of a solution. I personally do not believe we are a lost case, but I do admit frustration has been flooding me the last couple of days. I have been more and more annoyed by the attitude of lying and it being ok, the attitude of blaming others and it being ok, the attitude of denial and it still being ok. As Portuguese, we need to stop being ok with things, because the way things are is really not ok. It is not ok that we are close to "junk", it is not ok that the international world thinks we do not want any austerity measures, or have had no austerity measures, it is not ok that our PM blames one day of opposition parties vote for the billions of debt that he needs to pull together over the next 2 months. It really is not ok that people don't put their egos aside and stand up to the hard task of actually running a country full of brilliant minds but in total disbelief of what this country can bring to them. Today we start, because the way things are, is not ok!