On my last visit to Lisbon, people were scampering to finish projects funded by the European Union. There was scaffolding everywhere as the buzz was, “This is the end of the easy money — use it or lose it, quickly!”
I should have known then, but there’s no free lunch — even in the European Union. Today, Portugal has come to its day of reckoning. The money has dried up, and the interest due on the debt is crushing the local workforce. Portugal’s 11 million people produce about $240 billion annually — nearly the same as Louisiana. But Portugal has about 14 percent unemployment. It once exported dried cod; now its top export is people.
Major projects in Portugal are not just stalled. They are stopped. The TGV-style bullet train from Madrid to Lisbon, Lisbon’s new airport, planned freeway expansion…all nice ideas…all stopped.
Last night, as we walked the newly pedestrianized streets of the Barrio Alto district, things were relatively quiet, even though 50,000 locals were packing the Lisbon stadium for the big, crosstown-rivals soccer match. During our stroll, my friend told me, “In pre-euro days, with the escudo as our currency rather than that deutsche mark in disguise, when there was no money for chocolate milk, we just made due with white milk. Until 1974, when we won our freedom from Salazar (Portugal’s Fascist dictator was overthrown in the “Revolution of the Carnations”), we were on the donkey system. Then we got the fever. With the EU, dazzled by German standards, we were encouraged to have faith in debt. Portugal was made drunk economically by those cheap European loans.”
Today Brussels sends the Portuguese not money but the “Troika,” a trio of managers from the EU, IMF, and European Central Bank who enforce austerity measures to get things on a sustainable track. That means higher tolls on more highways, a new 23 percent tax put on all restaurants, higher deductibles for hospital visits, and cutbacks in health care. Utilities such as electricity are being privatized. Retirement was just raised from 65 to 67 years. And the Troika made the government rescind a worker-friendly scheme of the revolution which took a year’s wages and broke it into 14 “months” rather than 12 to give workers a “bonus” each summer and Christmas. Now workers making over €650 (about $800 a month) get only 12 months’ pay. As this was never really a bonus but just a forced savings account, this amounts to about an 18 percent cut in pay.
Local politicians are fighting despair. To the Troika, the Portuguese, compared to the Greeks, are considered very quiet workers with a nice reputation and good behavior; they’re willing to take their medicine responsibly.
As for the traveler, despite the economic downturn, it’s wonderful to be prowling the streets of Lisbon after dark. Trendy and stylish little bars and restaurants are working hard for their customers. On my first evening in Europe, I’m already back in my research groove.
wow, this seems incomprehensible. i hope they find a way to keep out of the slump.
I do trust all the concepts you have presented in your post. They’re very convincing and can definitely work. Still, the posts are very short for novices. May you please extend them a little from next time? Thank you for the post.
The United States is next. Our excessing government spending for social programs following the model set by Europe in recent years will result in the same conditions here.
Excessive social spending always results in this, no matter what country. I agree the US is next, especially if the monstrosity called Obamacare is upheld by the Supreme Court. Even after passing a bill that nobody even READ, the GSA is stating the costs were underreported by BILLIONS. You think? The worst thing to happen to Europe was adopting the Euro.
The future is really on the internet but will this ever change? I mean, individuals can even find industrial listings on-line as well.
Its was great to meet you in Santa Clara back in March! My wife and I will be in Barcelona starting Saturday for five days before heading to “La Cote d’Azur” so hope to run into you there.
Being part of the EU makes it more restrictive. If Portugal had its own currency, it could de-value it and “export its way” out of the crisis like Brazil did when it devalued the Real, since doing this would result in goods in Portugal being cheaper, sparking an interest from outside countries to buy their products (increasing exports and money coming in to teh country). Of course this is a violation of the WTO which Portugal is a part of (through the EU).
China gets away with it because they joinded the WTO as a developing country which allows them lots of flexibility regarding currency valuations and government-backed investments. As you’ve probably seen in the Financial Times, the WTO has been working to get China to stop devaluing their currency, with global ripples still undetermined.
There is no free lunch. With the mind set in our country and others to not invest in our society will only catch up down the road. If you take away or decresae education, if the insured have to keep paying for the uninsured and we cut out or severly reduce retirement benefits the result in 20 years will be huge. You can just cut everything and worry about it later but it will come back to us in the future.
We’ve seen what profligate “investments in society” have created…huge debt which puts society on the brink of collapse. The mentality of wanting a government to provide cradle to grave benefits is what the problem is and we see in the riots in Greece and Spain what happens when the government has to cut back on handouts. Europe should ditch the Euro. I agree with what Rick Lacerte said. Prior to the Euro, countries which faced similar problems just devalued their currency. Can’t do that now with the Euro.
We are looking forward to our upcoming visit to Portugal. The economic sanctions being imposed by the EU will not improve matters, but will only make things worse. The neocons, some of whom have posted here, lack an understanding of the basic economic science. There are times to incur deficits and times to build up reserves and payoff debt. The worst time to cutback on spending is during a recession. That is when you need to spend to encourage job and economic growth. Once the economy picks up, as it did during the Clinton years, you can begin to payoff the deficit.
Poor Portugal. It is the victim of its politicians and its citizens because when did people (and banks) ever hesitate to vote themselves money from the public treasury. It joins Greece, Italy, Spain, Ireland, France and even to a great extent England and the U.S. in the never ending quest for freebies and the inevitable aftermath. Still, if Portugal, bites the bullet and does not disrupt its tourist season with riots, tourism dollars can help soften the blow during the several years it will take to strengthen its economy (or withdraw from the Euro and go back to escudos).
In my comments about Portugal above I neglected to give RS credit for his entire insinuation into our lives. His tour book on France of a few years ago provides the perfect angle to soak my sore toe. This is not a reflection on the quality of the guide book, because I still refer to it, but rather upon its dimensions – especially its Goldilocks-size thickness.
Nice Article..
Have you been to Malaysia or India before?
I love your Blog