You
can’t ignore our sacrifices, Portugal tells Commission
The
leftist government in Lisbon wants to cut debt and deficit while
restoring workers’ pay and rights.
By IVO OLIVEIRA
6/16/16, 4:46 PM CET
Punishing Portugal
for missing its eurozone deficit target would send the wrong message
to the rest of Europe about whether it’s worthwhile asking the
population to make sacrifices, said Portuguese Economy Minister
Manuel Caldeira Cabral.
Once the poster
child for austerity, endorsed by German Chancellor Angela Merkel who
visited the then center-right prime minister Pedro Passos Coelho in
2012 to show her support, Portugal has switched track in seven months
of Socialist leadership.
Prime Minister
António Costa has tried to raise consumer spending, while boosting
the minimum wage and reintroducing four public holidays scrapped by
his predecessor. Costa came second to Passos Coelho in last October’s
elections but formed an alliance with the Left Bloc, the Communists
and the Greens to oust the conservatives.
Lisbon risks fines
from the European Commission for exceeding the eurozone budget
deficit target of no more than 3 percent of economic output. In May,
Portugal and neighboring Spain — their deficits are 5.1 and 4.4
percent of GDP respectively — got an extra year to reach their
targets, mainly to avoid the prospect of sanctions influencing
Spain’s elections on June 26.
However, Brussels is
keeping up the pressure, with Eurogroup President Jeroen Dijsselbloem
saying Tuesday he was worried about the credibility of the “guardians
of the [stability and growth] pact” being undermined by a
permissive approach to targets.
Caldeira Cabral
discussed Portugal’s economic performance with members of the
Commission during a visit to Brussels this week, and sat down with
POLITICO afterwards to discuss his country’s policy shift.
POLITICO: Why
shouldn’t the European Commission sanction Portugal?
What is being
evaluated are the last three years — the policies of the former
government. There is now consensus that it applied too many austerity
measures and the results didn’t turn out as well as expected. But
that was the result of a policy aligned with what was then European
Commission policy. Are we going to sanction Portugal for applying the
exact formula it was told to by the European Commission? … It would
be an extremely wrong, unfair decision, because the country made
sacrifices during those years. It would be counter-productive too,
because the Commission would be sending a signal to the rest of the
EU that a country that makes an effort and does exactly what the
European institutions say, can still be sanctioned because maybe the
results were not as good as expected.
The European
Commission should focus more on the real problems existing in Europe
and the real solutions, which will come via a real policy for growth,
innovation and science to put Europe back in a leadership position.
We presented these policies today to the European commissioners, who
were very interested to know more about the innovation policies the
Portuguese government is setting out regarding capitalization,
support for the private sector of the economy, and what we’re doing
to adapt to the challenges and opportunities of Industry 4.0.
Portugal is rolling
back austerity and Italy wants to: Is the German austerity era over?
When a business has
to adjust to a crisis, it can recalibrate by lowering salaries and
firing workers. In a country or in the EU, when all businesses do
that, what happens is that each business is laying off another
country’s consumers. That’s the difference between microeconomics
and macroeconomics. When we lose sight of consistent macroeconomic
policy, we lose the sense that the policies of a country, or of an
integrated economy like the eurozone, must differ from mere
accounting policies.
On the other hand, a
country is also different from a business. The first thing a business
has to do is to choose its employees wisely. The last thing a country
should do is favor some citizens and relegate others. A country needs
to work with all its citizens and offer them growth opportunities.
Are you trying to
reverse the previous government’s austerity policies?
The intention is to
go beyond the extraordinary measures that were put in practice during
the bailout program. These measures were needed to tackle an
extraordinary situation, some of them implemented for three years,
others for four years. Our own constitutional court — Portugal is a
state of law — allowed them to be applied as extraordinary
measures. They were supposed to end when the adjustment program was
over. The new government is making an effort — is committed to
ending them. But that doesn’t mean that there is no consolidation:
Our public deficit situation got better in the first three months of
the year already, with a partial recovery of salaries. We are not
reversing or questioning the budget consolidation policy, but we are
trying to reduce indebtedness without a deterioration of social
rights.
What would be the
consequences of Brexit for Portugal and Europe?
Portugal is
England’s oldest ally, the two countries actually have the oldest
trade treaty in the world, and Portugal and the U.K. will maintain
that treaty and alliance and remain close to each other. I studied
and did my PhD in England, lived there for six years … and this
important alliance between Portugal and England is very dear to me.
What Portugal and
the U.K. have in common is that they’re both Atlantic countries. An
EU without the U.K. would be less complete and less Atlantic-facing,
and that would be negative for all Europe. In European negotiations,
the U.K. has always had a pragmatic role, critical of certain
advances by the EU and useful in correcting excesses in some other
dimensions, such as excessive regulation. … But in the end it’s a
decision for the British people which we must all — in the U.K. and
EU — respect.
After six months in
government with the support of the Left Bloc and Communists, what
advice would you give Spain’s Socialists for after their elections
on June 26?
I think Spain needs
to find its own solution, and it looks like it’ll have to find a
solution in a parliament where no party will have a majority. In
Portugal’s case, the agreement we reached was positive … It
allowed the government to fulfill much of what was promised in the
election campaign within six months. So we still have 3-1/2 years to
develop other policies, which were also in the manifesto.
This interview was
edited for length and clarity.
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