Big ticket public work investment and unemployment

Divergences between the two main political parties, the governing PS and opposition PSD, on large-scale public works projects will dominate the national and local elections which have been announced for September and October this year.

The country will go to the polls in the local municipal council elections on October 11, in which rate-paying foreign residents will have the right to vote, while the General Election is widely expected to be held on September 27.

Although neither of the two key parties has issued their detailed general election manifestos, opposition leader Manuela Ferreira Leite has repeatedly pronounced on the folly of big government spending on public works projects such as the TGV high-speed rail link, the new Lisbon International Airport and a spree of motorway building.

Instead, the conservative centre-right PSD party has been hammering home the importance of selected investment to help inject incentives to innovative and quality-driven Small and Medium Sized Companies, or SMEs, which account for 99.5 per cent of all business in Portugal and employ 2.3 million people, generating a annual turnover of some 130 billion euros.

According to the opposition leader this is the best way to protect jobs and boost exports as well as keeping public spending under control, a policy that has widely been endorsed by a group of 28 left and right wing economists, including three former PS ministers, who last week issued a controversial manifesto calling for large-scale public works projects to be on ice until the country could afford them.

José Sócrates’ ruling PS party, however, believes that the expensive projects are vital to boost the economy, modernise Portugal and keep people in work, arguing that the wages paid will indirectly help the consumer and retail economy until Europe emerges from the recession.

The local elections will centre round the proposals for a new Local Government Finance Law which will give local authorities more say on how they spend their money, will grant them greater powers to levy local taxes and increase autonomy and reduce central government control.

Next week: What you need to do to be able to vote in the local elections.