What NOT to do in case of crisisOr, the current economic and political situation in Portugal

In the beginning were the structural problems…

• Low qualifications, low wages, low value added activities

• European integration and external pressures

• National bourgeoisie

• The euro?!• Did we loose “competitiveness”?

• Did we have a real estate boom?

• Are Portugal – Greece – Spain – Ireland the same?

Public finances

• Structural:

• Dismal growth

• De- fiscalisation

• Privatizations

• PPPs

• Conjunctural

• Budget stabilisers

• Speculation

• Bank bailouts

REVENUES Vs. EXPENDITURES

But then came the financial markets…

• TRUE, THE PORTUGUESE ECONOMY SUFFERS FROM SEVERAL STRUCTURAL PROBLEMS (WHO DOESN’T?!)

• FALSE, THESE ARE NOT RELATED TO HIGH WAGES, PUBLIC SERVICES OR A STRUCTURAL EXCESSIVE PUBLIC DEBT

AND TROIKA

Austerity since 2011: 23 bn (14% GDP) Taxes Wages/pensions Public services Privatizations

Structural measures Pension age to 67 End of collective contracts Unemployment benefit rules Increased labour time

How NOT to adjust public finances

LONG TERM UNEMPLOYMENT

GDP – quarter % change (yoy)

The new “economic miracle”

GDP – quarter % change

•GDP growth? (constitutional court)

•Decrease in unemployment?

• Exports?

State budget: The nightmare before christmas

• Austerity: 3,7bn• 3,2bn expenditure• 70% Wages and Pensions (2,2bn)

• 30% Health, Education, Social Security

• 0,5bn revenues• 0,15bn (150m) banks and energy corporations (4% total)

• 0,35bn (350mio) taxes

• 1500bn for swaps

• The new corporate tax reform

Public Debt: the nighmare after christmas

PUBLIC DEBT AT 80% IN 20 YEARSHOW TO SQUARE A CIRCLE?

Primary surpluses around 5%

GDP growth around 4%

Interest rate burden

Life after Troika

• 2nd memorandum vs. something else

• Fiscal compact

• Constitution in danger

Life after Troika

• Debt restructuring

• Productive reconstruction

• End of austerity