Thousands joined the Vida Justa citizens movement in Lisbon last Saturday to demonstrate against the rising cost of living
Thousands joined the Vida Justa citizens movement in Lisbon last Saturday to demonstrate against the rising cost of living

Cost-of-living crisis: President admits further support may be needed

When President Marcelo Rebelo de Sousa warned last November that 2023 would be “very much more difficult than 2022”, he could see what was coming.

In spite of government platitudes that inflation would come down (and it has), Portugal’s head of State can actually say what he thinks. He is not in a position that requires positive polls. Two months into 2023, and life in Portugal has already shown itself to be a great deal more fraught and expensive than it was in 2022.

Inflation pegged in February (at 8.2%) has fallen for the fourth consecutive month. But what comfort is that when prices continue to climb? When staple foods are increasingly more expensive? When the bulk of mortgages are already set to increase yet again – and when services (like health and education) are beset by staffing shortages and closures (in the case of the former) and seemingly endless strikes (in the case of the latter)?

Thousands took to the streets in Lisbon last week to demonstrate against the rising cost of living, and “the few who accumulate many millions” while the mass of society is left to get poorer.

Portugal’s government has been seen to prop up loss-making banks or the country’s financially floundering flagship airline TAP with untold billions of euros – but it was caught out ‘tricking’ pensioners of what had been promised to be ‘an historic increase’ in monthly payments this year, and the housing crisis is amplifying the fact that ‘ordinary working people’ are struggling to keep any kind of roof over their heads.

Citizens movement ‘Vida Justa’ had all these inconvenient details on their protest banners last Saturday. Much more would have been made of them had the nation’s perpetually striking teachers not deflected from the protest by holding one of their own, and staging further theatrics on the steps of parliament.

President Marcelo ventured out into the streets (almost certainly anonymously) and considered both protests.

His comments to journalists afterwards were brief but incisive: the government may well have to “ponder complementary social support” beyond the ‘extraordinary payments’ and subsidies it announced last year.

Marcelo’s view is always a great deal wider than anything the country seems to get from its political leaders. Thus when a survey published over the weekend by Público showed food price increases are higher in Portugal than they are in the eurozone as a whole, he responded that prices in other countries are actually also increasing; that what is happening here is, in fact, a reflection of what is happening everywhere in Europe: “the war is still going and will continue to run, inflation is reducing less rapidly than everyone wanted (…) and the news from, for example, Germany is not good…”

Whether he was referring to Germany’s cost of living woes, or the 10,000 or so citizens who marched in Berlin against the country’s decision to continue sending arms to Ukraine was unclear – but he set the scene: inflation is undermining a lot more than the cost of living.

“Dissatisfaction” is a daunting scenario – hence why the government may well be “obliged to proceed with a rethink of complementary social support – in one month, two months, three months’ time” – in order to assuage its rising tide.

Portugal is third European country where food prices have increased beyond inflation

 This was the gist of stories at the weekend as thousands of people thronged through the streets of Lisbon in angry protest.

The central issue is not simply that prices are increasing; it is that incomes in Portugal are generally well below eurozone averages.

Foods that have increased the most are constantly referred to: they include fish, meat, eggs, sugar, rice, fresh milk, vegetables, cooking oils. Gas too has maintained a year-on-year inflation, according to statistics institute INE, of 143.2%, compared to 51.9% in the eurozone.

Compared with prices practised a year ago, food costs have effectively increased by a little more than 20%, which beggars the question ‘why?’ (bearing in mind inflation is only in single figures).

Producers cite the cost of raw materials, energy, transportation … but there is a feeling in the air that ‘advantages are being taken’.

“Someone is benefitting”

Talking to SIC television news this week, financial writer/journalist José Gomes Ferreira cut right to the chase: “Someone is benefitting … right now we are seeing price increases particularly in fruit and vegetables, and in seasonal produce. But there is no drought; there are no floods; crops have not been destroyed. What is happening?”

It is not unheard of for large supermarket chains to be accused of price fixing. Gomes Ferreira clearly believes something is up.

And what are the authorities tasked with checking on this kind of activity doing? Fining businesses for not having the correct telephone numbers on their letter heading, he complains.

“Where are the priorities of these entities?” (entities like food health and safety ASAE). “Shouldn’t the competitions authority look into what is going on in the large supermarkets?”

This point also underscores the reason why the protests last weekend took place in Lisbon. In cities, the bulk of residents shop in large supermarkets owned by chains. In smaller communities, like the Algarve, there is less of this kind of dependence – and to an extent, less overt discontent.

Nonetheless, people everywhere are being forced to reduce expenditure wherever they can as money – in the words of SIC’s report on rising prices – is suddenly “worth less”. Imagine how bad it could get if those two words were combined. 2023 has only just begun. There is a long way to go yet.

Unemployment rises to 7.1%, highest rate since November 2020

On Wednesday, statistics institute INE reported that unemployment increased in January to 7.1%. That is (only) a 0.3 percentage point increase on the figure for December, but it is indicative of where the economy could be headed.

João Cerejeira, Professor of Economics at Minho University, told CNN Portugal earlier in the week: “In spite of the increase in prices and loss of purchasing power, there has still not been a shock in terms of demand (…) the increase in unemployment is still not significant (…) When the labour market shows signs of unemployment increasing, confidence will worsen. There are still not many dismissals, but there is already less in terms of hiring.”

By Natasha Donn
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