| Out of the Trap

April 2014  Druckansicht    Druckansicht
By Frederico Pinheiro

The austerity measures dictated to Portugal by the Troika’s Memorandum are nearing completion and should be fully implemented by May 2014. The impact on Portuguese society is huge. As a consequence of these policies unemployment has risen, the phenomenon of emigration has returned, the social state has been dismantled, and all major public enterprises sold off.

In what follows we will try to convey what is happening in Portugal. After laying out the context, we will discuss the austerity measures and their consequences and then outline Portugal’s political scenario and the activity of its social movements. Finally, we will discuss the European elections within Portugal and the strategy of left parties.

It looks like a revolution

The forms of social protest in Portugal have undergone profound change. The onset of the financial crisis in 2007/2008 was an important turning point in this process. At that time, the minority government led by the Socialist Party (PS, comparable to Germany’s SPD) began the implementation of the austerity measures contained in the various legislative phases of the Stability and Growth Plans (SGP). The government’s austerity strategy was the catalyst that triggered the historic series of protests, the two most significant being those of 12 March 2011 and 15 September 2012. Around 10 million people, that is, 10 per cent of Portugal’s population, participated in the 2012 demonstration.

This wave of opposition and outrage was born in opposition to the austerity measures and to the political and economic strategy pursued by the different European governments to overcome the financial crisis. Through a concrete strategy on the part of international finance and supported by both Social Democratic and right-wing governments, this crisis has rapidly turned into a crisis of the euro area and of sovereign debt.

While crises are times of fear and withdrawal amongst the masses suffering from insecurity and need, they are also potentially defensive times of collective action and rebellion among those who have lost faith in the formal institutions. In such times the search for systemic alternatives becomes meaningful. We are witnessing a change in the way Europeans look at European leaders. The crisis of capitalism is showing that breaking the social contract engenders a popular hostility towards European institutions similar to the hostility of Asians, Africans and Central and South Americans towards their ruling structures. The development of social movements is cyclic, and this crisis has proven to be a spawning ground for social activists.

The economic crisis not only provides a new context for social movements but also one that favours the emergence of radical anti-systemic ones at the same time as it reinforces the organizations that represent those most affected by the crisis.

The financial crisis triggered in 2008 made clear that the main lines of conflict in society are those of the traditional social question: the antagonism between capital and labour. This was plainly the basis of the enormous mobilisation leading to the 15 September 2012 demonstration in Portugal, when a million people took to the streets. The government had intended to raise taxes for employees and reduce those for the companies. This blatant transfer of wealth from labour to capital is what activated people. The result was a tremendous popular victory, which forced the Troika and the government to retreat.

It is evident that the fightback of citizens does not result from an ideologically motivated attempt to achieve a new model of society but a simple wish to improve their living conditions, rights and freedoms, and to advocate different perspectives for resolving the economic crisis. The breadth of the political spectrum of protest at the same time presents a problem since it ranges from right-wing movements to left-revolutionary ones.

These protests are clearly inspired by the so-called Arab Spring. Despite the differing origins, motivations and features of the Portuguese and Arab-Spring protests there are some commonalities: youth as a catalyst for broader social struggles; a discourse usually focused on denouncing the economic system and the capture of institutions and politicians by the financial elite; the intensive use of social networks; and the importance of audiovisual culture and the new information and communication technologies.

Moreover, despite the different social, economic and cultural-historical context, the form and content of protests tend to be similar in different countries. The Arab Spring uprisings, and those in Portugal, were initiated by enlightened and highly skilled youth, mostly unemployed, who wanted to participate in decision-making processes. They were widely followed by a media that allowed the world to see what was happening – social networks or the TV channel Al-Jazeera; and there was a culture of cyber activism that had been fostered in preceding years.

In essence, all of these protests are part of a struggle against the capitalist system, which is seen as being in collapse and destructive of any people’s future. They are a consequence of the eroding of democratic institutions and of democracy itself. Citizens feel they are excluded and lack control over their own future and their country.

Today, the European Union is widely seen in Portugal as anti-democratic and its leaders fragile, given the extremely high abstention levels in elections. As in the post-revolutionary period following nearly fifty years of dictatorship, people are organizing mass events, informal meetings, different collective modes of being together and taking decisions on various issues. These are phenomena typical of nations after emerging from anti-democratic and authoritarian systems. Portugal and Argentina are two examples, and the Spanish movement’s name well expresses their essence: Democracia Real YA! – Real Democracy NOW!. The parallels with the political systems of North Africa before 2011 are striking.

The degradation of living conditions, combined with the crisis of legitimacy of political institutions, is the background against which the waves of moblisations are taking place. From Tunisia to Egypt, from Libya to Iceland, popular mobilisations succeeded in rupturing a status quo inspiring subsequent demonstrations in several European countries: Portugal, Spain (the acampadas), Greece (the Squares movement), Germany (Blockupy), but also in the U.S. (Occupy Wall Street), and more recently in Brazil with the protests against transportation fare hikes and the huge expenditures for the Olympics infrastructure, or, in a more complex context, in Oman, Bahrain, Yemen and even Syria with a still more complex scenario sliding into a civil war.

All these mobilisations are due not just to concrete and objective conditions but also to profound immaterial changes in terms of the social perception of the world, which was able to turn discontent into protest, despair into anger, dissatisfaction into concrete proposals, and passivity into collective action.

As we have said, in Portugal the founding moment of this cycle was the 12 March 2011 demonstration. Beginning with an internet appeal and outside of traditional structures the protest filled the streets in several cities of the country with almost a half million people. For a detailed treatment of this event see my article ›Wir wollen unser Leben zurück‹.[1]

The Portuguese movement against the Troika is characterised by informality, the demand for horizontal and decentralised forms of organisation, a large national and international network of social movements, the combining of a global and local outlook, the leading role of highly skilled unemployed youth, the intensive use of information and communications technologies, programmatic fluidity and the wish for democratic experimentation, the return to the old conflict between labour and capital, the re-emergence of new issues expressing the rights of social minorities, in a context of permanent unemployment.

The causes of the protests

For the Portuguese sociologist José Soeiro has identified the two major factors feeding the waves of protest as: a) mass unemployment and labour precarity, especially among the youth; and b) the economic crisis and austerity strategy. I would add a third: the attack on state functions.

Mass unemployment

One of the major objectives of THE Troika’s austerity programme implemented in Portugal is to increase the downward pressure on wages through the creation of a large mass of unemployed citizens. This kind of adjustment process is inherent in capitalism. The crises of the system, such as the present one, are increasingly recurrent and cyclical, with the current recession closely resembling the Great Depression of 1929, as is most clearly seen in Greece and Portugal. Greece’s recession is now in its sixth year, and it has by now become an underdeveloped country; Portugal is entering its fourth year of recession.

Marx demonstrated how in its expansionary phase the capitalist system creates more wealth, raises the social level of employment, increasingly taking citizens out of the unemployed pool. With this increase in the demand for labour its supply dwindles. There are two consequences: Workers’ bargaining power increases and capitalists are obliged to raise wages, thus reducing their profit margin. When this reduction reaches its limit, a mechanism is triggered that at once cuts investment and employment. This is called ›adjustment‹. This process is characterised by a temporary withdrawal of capitalists from the labour market – in contrast to workers who do not have this leeway, as they hold no capital reserves. The result is economic recession, with jobs destroyed and downward pressure on wages.

In its seventh report the Troika maintains that despite the 25 % decrease in real wages in Portugal they should fall still further, even if this would result in half the German wage level and 60 % of the European average. This decrease represents a change in the relations of force.

Crisis resides in the very DNA of capitalism. Cyclic economic recessions and massive job loss are indispensable to its continuity. The creation of high structural unemployment and a mass of precarious workers is one of the main victories of the forces backing austerity. In Portugal, it is estimated that 820,000 people were unemployed by the end of 2013, which means 16.5 %. Added to this are 250,000 underemployed citizens and 28,000 inactive, not officially unemployed but available workers. Consequently, real unemployment involves 1.1 million people.[2] However, this figure still does not reflect the huge emigration, which is only comparable to that of the 1960s, when the Portuguese population fled from the fascist regime and poverty. Official data is not yet available, but government estimates point to 120,000 citizens emigrating every year.[3]

This represents a dramatic increase in relation to the levels existing on the eve of the implementation of the Troika’s programme. In the first quarter of 2011 there were 689,000 unemployed people, with an unemployment rate of 12.4 %. The Troika’s policies have created over 130,000 officially unemployed people and have ›expelled‹ at least 300,000 citizens from the country from 2011 to 2013. This emigration is a nightmare for Portugal, as it is losing the generation with the best academic formation.

The following graph shows the evolution of the unemployment rate from 2000 to 2013.

 

Pin-Graph

 Source: The Portuguese National Statistics Institute

As is known, unemployment is a major economic and social problem for society. However, high unemployment is now here to stay. According to the IMF’s forecasts,[4] structural unemployment will remain above 14 % until at least 2017. This massive unemployment has made possible an enormous transfer of income from labour to capital.

The combination of the increase in unemployment and the reduction of social benefits results in a dramatic social emergency. There are continuously more people without work or income. In the first quarter of 2011, 42.5 % of the unemployed received state unemployment benefits. Two years later this percentage remains the same but with a sharp rise in the total number of unemployed. So a lot more people gets no benefits. There are more and more people (two million now) who are below the poverty line. Regarding the living conditions of the population, the National Statistics Institute reports that › … there is an increase in the proportion of people at risk of poverty: 17.9 % in 2009, 19.6 % in 2010, and 21.3 % in 2011. There is also an increased risk of poverty for children under 18 years of age (22.4 % in 2009, 23.9 % in 2010, and 26.1 % in 2011) and there is a still steeper increase in the risk of poverty for the working age population (15.7 % in 2009, 17.7 % in 2010, and 20.3 % in 2011).‹

This rise in the rate of unemployment has caused a contraction in the nominal wages of employees. 2013 was the third consecutive year in which Portuguese wages fell, which represents the largest fall in workers’ remuneration since the Bank of Portugal began to record this data in the 1990s.[5]

Precarisation is one of the principal aspects of the current ›great transformation‹ (to use Karl Polanyi’s term) within the capitalist regime), which affects its forms of production, exchange, and regulation. As José Soeiro points out, the last decade in Portugal has seen the process of precarity deepening and taking on new forms. According to official sources, in 2010 37.6 % of workers aged 15 to 34 had temporary contracts, and in the 15 to 24 age group this percentage rises to ca. 50 %. Temporary work showed the highest growth in this period, especially affecting unskilled jobs in the service and commerce sector. 280,000 were involved in 2010, but this number will probably rise to almost a half million,[6] and the trend points to a continuing increase, since it has been the only type of employment to have shown an increase in absolute terms during the crisis.

The growth of precarity has important consequences for the mode of life, especially of young people who are so exposed to it. Among other things, it means (1) a greater vulnerability to processes of exclusion, (2) the prolonging of the transition into adult life, (3) the postponement of life projects, (4) a difficult process of emancipation and the lack of autonomous housing (with the continuation of life in the parents’ home or even a return to it), (5) a gap between the expectation of social mobility associated with higher skills and the real lack of opportunities in the labour market, (6) the over-exposure to underemployment and lack of access to social protection, (7) forced emigration, and (8) the emotional consequences of the continued unpredictability of the future.[7]

Austerity policies

Citizens are beginning to feel the effect of shouldering the costs of bank bailouts. The irresponsibility and greed of the financial sector is now met with bizarre levels of bailouts using the money of citizens. The population is being squeezed, with the state in the age of austerity always ready to help the financial sector. Beyond the evident class alliance involved, this is also based on an ideology: If the banking sector is healthy all of society will benefit.

All of these processes lead to the naturalisation of inequality. In Portugal, as in the case of other countries under the Troika regime, austerity policies were justified by convincing the population that it had been ›living far beyond its means‹ and that ›we have to impoverish ourselves to exit from the crisis‹, as the Portuguese Prime Minister has said on several occasions. In connection with the reduction of the budget deficit and sovereign debt, many austerity measures were implemented aimed at liberalising the Portuguese economy. Its components are as follows:

Privatisation programme

The Troika’s Memorandum agreed on the privatisation of ANA – Airports of Portugal, TAP, CP Carga (transports); Galp, REN, EDP (energy); the Portuguese Postal Service (telecommunications sector); and Caixa Seguros (insurances). Later additions to this package were RTP (Portuguese Radio and Television) and Águas de Portugal (the public water supply). The last two years saw the selling off of ANA – Airports of Portugal – to Vinci, a French company, and the majority share of REN, 40%, to China State Grid and to Oman Oil – the Portuguese state now owns only 11.1% of the agency.

Furthermore, the last share in EDP, 21,3%, was sold to China Three Gorges. 70 % of the Postal Service, CTT, was sold in the stock market for a half billion euros. From these operations the state received extra income of 6.5 billion euros, equivalent to 4.3% of GDP. The sale of TAP was postponed after the only buyer to have bid, German Efromovich, failed to give the required bank guarantees. Other companies are expected to be sold off this year.

Besides privatisations, the government is finalising a concession plan for public transportation in the metropolitan areas of Lisbon and Porto, Portugal’s two largest cities. The Metro do Porto, Lisbon Metro, STCP (Porto bus), Carris (Lisbon bus), Transtejo/Soflusa (Lisbon boats), and CP-Train of Portugal (Lisbon, Porto and national trains) will be concessioned to private companies at the beginning of next year.

Budgetary and fiscal policy

One of the major imbalances that the austerity policies was supposed to redress was that of public accounts. According to Grandes Opções do Plano 2012-2015 (which outlines the government’s strategy),[8] the goal was to reach a primary budget surplus of 5 % of GDP in 2015, providing a financial cushion accommodating the payment of interest, thus balancing the budget. According to data from the Bank of Portugal, this goal has never before been achieved within Portuguese democracy. In reality, the goal was a gigantic transformation of Portugal’s economy.

The financial crisis of 2007/2008 had a severe effect on Portugal’s budget. Besides the structural problems of the Euro, the EU’s institutional architecture and Portugal’s productive profile, there is also the shock caused by the international crisis. The activation of automatic stabilisers led to an increase in the deficit by -10.2 % and -9.9 % in 2009 and 2010 respectively, as we can see in the graph below:

Pin-Graph3.jpg

Source: Bank of Portugal

 

The budget deficit was not remedied by the austerity policies, and it even worsened the recorded public debt. The chart below shows the public debt in % of GDP: It was 107 % of GDP when the Troika programme was initiated and is now 127 % of GDP. This value is already well above the level considered ›sustainable‹ by IMF.

Pin-Graph2

Source: Bank of Portugal

For the end of 2013, the government is expecting a budget deficit of -5.5 % and a public debt at 130 % of GDP.

For several social, political, and economic reasons this terrible scenario was the result of austerity policies. However, two of these stand out: First, austerity policies lead to a deep recession and thus a drop in revenues (even with tax increases), and they increase social expenditures (even while attempting to cut benefits); second, as seen reflected in the GDP deflator, while GDP falls due to recession, the debt rises as a percentage of GDP, even if nominal debt were to remain the same (which is not the case).

Since the advent of the Troika, many austerity measures were applied in the context of budgetary and fiscal policy. Here are a few examples with the greatest impact on people’s lives:

I. General increase in VAT – for example, VAT at restaurants rose from 13 % to 23 % and electricity and gas from 6 % to 23 %;

II. An average increase of 35 % in employees income tax, as follows according to income brackets:

  • Less than 7,000 euros: 14.5 %
  • Between 7,000 and 20,000 euros: 28.5 %
  • Between 20,000 and 40,000 euros: 37 %
  • Between 40,000 and 80,000 euros: 45 %
  • Above 80,000 euros: 48 %

III. Added to these values was an average surcharge of 5 % on the annual gross income of each worker and also the subtraction of a monthly salary for all public employees (in Portugal salaries are paid 14 times a year). This was implemented in 2012 and the Government wished to apply it again in 2013. This year, however, the Constitutional Court judged it unconstitutional and the Government will be obliged to pay the fourteenth month’s salary. This can be considered a victory for all anti-neoliberal parties and protest movements. Actually, it was because of this strong opposition that it was possible to pressure the Constitutional Court into changing its own position on this issue – they had approved the measure in 2012.

All these measures were taken with an aim to paying the public debt, the central axis of austerity policy being to deploy public lenders in order not to hurt private ones. This is the new financial dynamic in Portuguese debt refinancing. Portugal stopped going to financial markets for capital and began receiving loans from the multilateral Troika, entities which already own 42.5 % of the national debt. As the weight of the Troika increases, banks, mostly non-resident, leave the country. The Troika represented the guarantee to European central banks that they would get back the money lent to Portugal. This is being done through the financial strangulation of the population and the country itself. The increase in public debt had an immediate effect on the amount of interest paid by citizens. Interest expenditure soared from 2.5 % of GDP in the second quarter of 2010 to 4.8 % in the first quarter of 2013, according to data from the Bank of Portugal. It will increase in coming years due to a snowball effect in the debt involving an increase because of interests. The government is refusing to restructure the public debt and insists on selling off the country’s wealth to pay off its creditors.

The attack on state functions

The austerity measures involve a strategy to liberalise the economy and reduce the weight of the state. Every public function is now fragile and has come under attack. The government legitimised this strategy, speaking of ›extra fat in the state, which should be cut‹. Two years later, the population began to understand that for the Troika it was the entire social state that was considered expendable fat.

In just two years the number of civil servants fell between late 2010 and 2012 from 660,000 to 580,000, that is, by around 12 %, according to government data. The government intends to reduce their numbers still further and to freeze their careers. It aims to accelerate the speed of this reduction and will approve the dismissal of 30,000 civil servants in 2014. As Portugal’s Constitution forbids their dismissal, they will be formally asked to leave. For those who do not accept the invitation, there is a new regime called ›requalification‹ invented for the express purpose of pushing employees out: After six months their salary will be cut by 33 % and after another six months it will be cut in half. After 18 months these workers have to retire from the state. Chaos in public administration will inevitably ensue.

Free national healthcare and public education are the two areas principally affected by these specific measures. The National Health Service (NHS) has suffered a huge setback. Besides the reduction of the number of nurses, doctors, and the shutdown of services, such as the flagship Alfredo da Costa Maternity Hospital in Lisbon (the largest in the country), the government has greatly increased the fees introduced by the previous government. Currently, consultation with one’s primary care doctor,[9] which was free up to the advent of the Troika, costs 20 euros. The revenue generated from users is becoming a criterion for assessing the sustainability of the NHS. On this basis, the government will continue to raise fees and cut services.

In the public education system, 30,000 teachers were dismissed in the last two years, reducing the total to a mere 102,000. They represent the state’s largest employment sector. This measure poses a severe threat to full-time schools and the quality of instruction. At the same time, there was a huge increase in the number of students per class, from 20-25 to 30-35. The results are obvious: an increased rate of dropout in the early school years and a drop in school performance. Nevertheless, the government intends to dismiss more than 10,000 more teachers this year.

The consequence of all these measures is a deep historic recession. For the first time after almost forty years of democracy, Portugal will show four years of decline in GDP, bringing it back to 1990s levels. Rising unemployment, the growth of the deficit and debt, and a widening social crisis are the main results.

All united against the Troika?

Unity between the Social Democrats and the parties of the so-called radical left (Communists, Trotskyists, and Maoists) is rare in Portugal. For years it has been hard to overcome some of the historic and ideological barriers amongst them, thus impeding the convergence needed to oppose right-wing measures. This obstacle also applies to the world of the trade unions.

Since the Portuguese Revolution of 25 April 1974, which ended fifty years of dictatorship, there are evident tensions between the Socialist Party (PS – a party with a humanist and social democratic tradition in social issues combined with liberal economic policy, making it similar to the German SPD), on the one hand, and, on the other hand, the Communist Party (PCP) and other left political organisations. Fourteen years ago the Bloco de Esquerda (Left Bloc), grouping many of these organisations within a spectrum resembling that represented by Die LINKE in Germany, was formed. Meanwhile, the PS has consolidated its position and importance within Portuguese society through a strategy that transformed it into a key factor in political stability. At the same time, it opposed the Communist Party, which was only party that continued to be organised during the years of dictatorship. Since it is our view that the PS’ multifaceted identity and its role in Portuguese politics contributed in a major way to block left unity in Portugal, we need to demonstrate this in some detail.

The PS emerged in the post-dictatorship period. It was founded by leading opposition personalities such as Mário Soares and Manuel Alegre, who had returned from political exile in France after April 25. The PS aimed at preventing the hegemony of the PCP, firmly tied to the Soviet Union. The latent tension between the PS and PCP has been evident ever since the establishment of democracy in Portugal. Following the pattern of numerous social democratic organisations throughout history, the PS, whenever confronted with the decision of whether to cooperate with radical socialists or communists, has always opted for accords with the right. Thus, less than ten years after the Revolution the PS formed a government with the CDS-PP (the economically ultra-liberal and socially conservative Christian Democrats and the PSD, which is the German CDU’s sister party), that is, the so-called Central Bloc.

The brutal advent of the Third Way in England was the lure that entrapped numerous socialist parties in the world, including the PS. The PS tried to hold on to its image as defender of the social state, even as it consolidated its coordination with conservative social forces and implemented economically liberal measures. Thus, while it promoted and completed the privatisation of domestic banks, which played the pivotal role in financing the privatisation of companies in socially strategic sectors, the PS promoted social protection measures. Public agencies in the energy and transportation sectors (so-called natural monopolies) were sold off and state-owned industries such as cement, paper-making, technological companies put on the stock market. Companies which once belonged to the Portuguese state and its people are now owned by foreign companies: EDP by the Chinese and Cimpor by Brazilians. Some are now held privately with national capital representing the majority stocks, e.g. Brisa, now controlled by one family, Galp, dominated by Angolans. Their sale is a result of the strategic and historic link between the PS and conservative forces in Portuguese society.

The pursuit of such policies that consolidate a neoliberal state, deregulate financial markets, cooperate with big capital, and reduce the social state to a minimum has continually prevented the formation of large left fronts in Portugal.

However, there is a historic example widely remembered in Portugal. In 1990, the PS’ General Secretary, Jorge Sampaio decided to run in the elections for the Municipality of Lisbon. Against a background of extreme urban disintegration, the growth of slums, and other serious economic and social problems it was possible to form a coalition of the PS, PCP, the Revolutionary Socialist Party (PSR, Trotskyist), the People’s Democratic Union (UDP, Maoist) and Politics XXI (social democratic). However, this was only possible because Sampaio was a part of the left wing of the PS itself. Today the parliamentary left spectrum consists of the PS, PCP and the Left Bloc, which unites the PSR, UDP and Politics XXI in one party.

From 2005 to 2011 Portugal’s Prime Minister was José Sócrates.[10] That the PS’ pursuit of neoliberal policy impedes its cooperation with the PCP and the Left Bloc was demonstrated in 2009 when Sócrates lost his parliamentary majority and failed to get the support of any party, forcing him to accept a minority government.

Now the scenario has been definitively clarified. Radical left parties, for example the PCP and Left Bloc, have declared the debt to be the issue and have advocated for a haircut, a substantial cancellation of debts as the only way to provide a future for the economy. The PS, however, rejects cancellation and is for further negotiations with the Troika for a second bailout. Under these conditions, coalition is highly unlikely.

Breaking the wall, brick by brick

In speaking of the Portuguese movements, I identified two central moments of protest: 12 March 2011 and 15 September 2012. It is true that several moments of conflict and change occurred between these two dates – for instance the 5 June 2011 parliamentary elections, which resulted in a change of government – but these dates are the most important ones because the anticipated parliamentary elections would probably not have occurred without the 12 March demonstration, and brought the protests to a new level, the level of victory. Since 15 September 2012 the population knows that it can defeat the government’s and Troika’s programmes.

I would like here to consider the consequences of this process of protest. Breaking the consensus established by the government, the Troika, and certain social sectors has been very difficult. One of the government’s main strategic lines is not to cede any possibility of altering the Troika’s demands. They have decided to pursue this line to the bitter end, whatever the consequences, as we have seen.

However, reality intervened to contradict liberal theory. With rising unemployment, a growing budget deficit, and an unstoppable ballooning of the debt, the government had to contend with several protests, including a record number of general strikes. Since the 2011 national elections, unions have organised as many as four general strikes. This is the greatest number of such strikes within a two-year period that any government has ever had to contend with in Portugal. The latest general strike occurred on 27 June 2013 and was promoted by the two major union confederations, the CGTP and UGT.

The latest one was in 27th June 2013 and was supported by the two major confederations, the CGTP and UGT. This is a major step, because these two confederations have been acting separately for too long: The CGTP is linked to the PCP and the UGT is linked to the PS. The UGT is more favourable to the austerity measures and only clashes with the government when these measures target public-sector workers. But it is exhibiting some positive changes. Its new leader Carlos Silva seems more radical and anti-austerity than the previous ones.

Portugal now has a huge spectrum of protest movements aimed at defeating the government and the Troika. From the general strikes to the street protests of the social movements, to the demonstrations that bring together hundreds of thousands of citizens to occupy an abandoned building, from 12 March 2011 to 15 September 2012 – all this creates a broad composition of protesting forces, which in a first phase prevented the government from winning support and now weakens it day by day and hour by hour, publicising new data on government policies and even linking it to cases of corruption.

This is why the most prominent figure in the government in terms of his identification with all of the IMF’s, the European Commission’s and the ECB’s policies resigned on 1 July 2013. At the beginning of July, Vítor Gaspar, Portugal’s former Minister of Finance, and responsible for the application and negotiation of the Memorandum, admitted that ›I have lost credibility‹[11] because of the consequences of the austerity policies.

The following table makes plain why the second most powerful person in the government said that he had lost credibility:

2013

Memorandum forecast

Reality

Deficit

-2.1%

-5.5%

GDP

1.2%

-1.8%

Annual Growth of Exports

6.4%

0.8%

Unemployment

13.3%

16.5%

Public debt

115%

130%

Investment

2.4%

-7.7%

Private consumption

-0.5%

-3.5%

This has caused major turmoil inside the government coalition. A day after Gaspar’s resignation, Paulo Portas, the chair of CDS-PP, the second party of the coalition, also resigned, creating the possibility of anticipated elections. Without the support of Portas, Prime Minister Pedro Passos Coelho would not have the majority needed to gain Parliament’s approval of the Troika’s Memorandum measures.

In a major turnaround, Portas said that he would no longer leave the Government – when he saw that the reality would be elections and took note of the bourgeoisie’s displeasure at the idea. The President of the Republic asked the Prime Minister, Portas, and the head of the PS to meet and agree on a programme to cut 4.7 billion euros in public expenditures (3% of the GDP). The agreement was not signed, because of the PS’ refusal. However, to accommodate the wishes of the President of the Republic and to strengthen his team, Passos Coelho made a major change in his government in July.

This instability at the CORE of the government is the result of all the small and large protests organised by the population since early 2011. Seneca’s observation has become a popular saying in Portugal: ›Hard rocks are hollowed out by soft water.‹

The European elections and exiting the memorandum

The government is weaker than ever, but the change of team gave them a fresh wind. When all sides asked for new elections and the resignation of the Prime Minister, this play by Passos Coelho made it possible for him to get all is demands met.

With just three months to the end of the Memorandum, the government is appealing once more to the population’s capacity for sacrifice. After three years the population is being called on to resist and celebrate ›economic liberation’, as the ministers call it.

The political strategy is being played out in a double scenario: if the Government wants to show the population that they have expelled the Troika, it must also convince the population that the austerity measures are a permanent economic necessity. The ideological revolution is here to stay and will last beyond the Memorandum’s deadline. In recent weeks, we have heard Prime Minister Passos Coelho saying several times that ›we will never return to the standard of living we had in 2007‹. The population will be asked to make several more sacrifices. The neoliberal agenda intended to be permanent.

The government has until May to decide if it should apply for the precautionary financial assistance from the European Stability Mechanism or seek a ›clean’ exit, as Ireland did. The European institutions, from the ECB to the Commission, are recommending the ESM option, and so are the rating agencies, like Moody’s. While the government is trying to avoid this, it is the most likely scenario. A new memorandum will have to be signed with the ECB and the Commission; new restrictions will be demanded and renewed austerity measures put in place.

The trap is so complete that Portugal’s alternatives are either a bad or a terrible scenario. In 2014 Portugal must finance more than 10 % of its GDP from the financial markets. If it faces these markets without the ESM safety net it is highly probable that Portugal will face new speculative attacks like those of 2010-2011. The ESM guarantees that the bond holders will not face a haircut because the ESM will buy their titles in the secondary market. In this way, all investors in the bond market will have minimised their risks and, as a consequence, the interest required by the primary market will fall. Its supporters say that this strategy is good for the country and for investors – a win-win situation.

The truth, however, is that this will not solve any of the problems Portugal faces. We cannot go into this problem in any more detail here, but we know that a substantial cancellation of the debt is inevitable. With the debt-to-GDP ratio reaching 130 % and the interest payment 5 % of GDP every year, the debt must of necessity increase annually, as the Portuguese Movement for a Citizen Debt Audit has demonstrated.

The ESM is only a means to formalise the austerity measures once again, which, as we have said, are in Portugal to stay for many decades to come.

One possible way to change this is through the European elections. A new relationship amongst Europe’s social forces would provoke a change in European policies. And this would be the solution for the peripheral countries trapped in the EU architecture and, in the Portuguese case, in the European monetary system.

With this in mind, some movement has occurred within the left political sphere. First of all, we have to remember the context we have already pointed to: the historical incapacity of the left to create convergences. Several attempts were recently made to connect the Socialist Party, the Communist Party and Left Bloc. All of them failed, for different reasons.

With the country near social collapse and right-wing forces stronger than ever, a group of 62 intellectuals and academics have gathered to issue a call for a major coalition of left movements. In my 2012 article, ›Wir wollen unser Leben zurück‹,[12] I spoke of the importance and relevance of Portuguese intellectuals in the protest movement. Now, they have built an informal collective called ›Manifesto 3D‹, which has challenged the Left Bloc to form a coalition with themselves and with the new party Livre, founded by MEP Rui Tavares. Tavares is a Member of the European Parliament elected in 2009 on the Left Bloc list. In 2011 he had a disagreement with Francisco Louçã, then leader of the Left Bloc, and he left the European Parliament’s Portuguese Left Bloc delegation and also the European United Left–Nordic Green Left group (GUE/NGL) in the European Parliament and affiliated with the Parliament’s Greens/EFA group. He has now founded Livre (Free), a new social democratic political party. The academic and intellectuals that constitute Manifesto 3D are former Portuguese politicians of the PCP, the Left Bloc, and the PS, and also social activists and citizens who have from the start fought against austerity policy. With Rui Tavares and the Left Bloc they have a possibility of convergence.

Manifesto 3D issued a proposal to Bloco and Livre for convergence in the European Elections. After several bilateral encounters, two official meetings were held between Left Bloc and Manifesto 3D, the first in December and the second in January. Left Bloc has declined a convergence, claiming programmatic differences with Rui Tavares. They instead proposed an alliance between Manifesto 3D and Left Bloc. Manifesto 3D rejected this as it would not meet their goal of achieving a broader alliance.

This ended the process that had begun in early 2012. The outcome is that Left Bloc and Livre will go alone to the elections and do present candidates on separate lists, and Manifesto 3D will not present a list.

Projections point to the present coalition in power – PSD-CDS – coming in second after the PS. This is a major change; it was the opposite in 2008. The PCP will get more than 10 % and Left Bloc will drop from 3 MPs to 1. It is also possible that Livre can elect one MP.

After four successive annual budgets (2010, 2011, 2012, and 2013) in which cuts were made, Portugal faces still more cuts. This means more reductions in wages and pensions, and increasing taxes, as well as cuts in healthcare, education, and social security. With the middle class already suffocated by the austerity policies, this budget will surely ignite more protests. Portugal is facing a scenario of more than two million people living below the poverty line, almost 1.5 million in real unemployment, and many hundreds of thousands of young people – with an unemployment rate of 42% for those from 18 to 25 years old – obliged to emigrate and leave their families and country. This is a social time bomb, ready to explode at each expenditure cut the government makes.

Everyone knows that this is a decisive year and that every effort must be made to prevent the signing of a new memorandum. Portuguese left parties and social movements must undertake a profound analysis of what permitted the survival of a three year Memorandum and of the government that has implemented it



[2]  ›Euro area unemployment rate at 12%’ – Eurostat, 31 January 2014 – epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/3-31012014-AP/EN/3-31012014-AP-EN.PDF

[6] The numbers were presented by Marcelino Pena Costa, President of the Portuguese Association of Private Sector Companies Employment (APESPE) in the newspaper SUN on 18 February 2011 and indicate that in 2010 there were 400,000 temporary workers. The increase since 2009 amounts to 300 000 workers.

[7] Nuno de Almeida Alves; Frederico Cantante; Inês Baptista; Renato Miguel Carmo (2011), Jovens em Transições Precárias. Trabalho, quotidiano e futuro. Lisbon: Editora Mundos Sociais. Magda Nico (2012), A Massificação da precariedade juvenil, in José Nuno Matos e Nuno Domingues (eds.), Novos Proletários. A precariedade entre a ‘classe média’ em Portugal. Lisbon: edições 70. José Soeiro (2012), ‘”Perdi o Emprego, encontrei uma ocupação.” Juventude, precariedade e o novo ciclo de protesto global’, in Giovanni Alves e Elísio Estanque (eds.), Trabalho, Juventude e Precariedade, Bauru, SP: Editorial Praxis.

[10] Portugal’s system is semi-presidential. The Government has legislative power; the President is the executive power. The President has the power to dissolve Parliament and call new elections, but power is exercised by the Government, formed by the Prime Minister and Parliament, which is elected directly every four years in national elections.