End-of-year deficit concerns

Deficit || End-of-year deficit concerns

As the Eurogroup puts Portugal on probation – doubting the government’s 2015 budget will stack up – and German chancellor Angela Merkel has stressed that Europe needs even more austerity, the big question is: Why are we listening?
“Austerity has not worked. It will not work,” say economists – and perhaps Portugal’s finance minister has a point when she says Brussels suffers from a “perception gap”. But where, the Resident asks, does that leave us as we come towards the end of another difficult year?
In the short-term, Portugal is still squirming under the troika spotlight. Despite the spin of our “clean exit” from the €78 billion bailout programme earlier this year, we are just as tightly bound by supervision as we ever were. Even though the coalition government is adamant it can steer the country through its economic icebergs, the Eurogroup meeting in Brussels this week stressed that it has serious doubts.
A determined Maria Luís Albuquerque stood her ground admirably, refusing to elaborate on the possibility that Eurogroup thinkers could have a point.
She even “avoided to the maximum” expressions like “take new measures” or “do everything in our power”, writes Público – preferring instead to say that the government would “adapt its budgetary strategy” if Portugal’s attempt to come in below the 3% deficit looks headed for the failure both Brussels and the IMF have predicted.
But while the country waits to see what actually happens, the desperate downsides of prolonged austerity have become increasingly evident.
New statistics in from INE (national statistics institute) point to a country where half the elderly people admitted to hospital are suffering from malnutrition.
The number of deaths among old people due to falls is also up – and these too can be attributed to the lack of proper nutrition, almost certainly linked to the fact that Portugal’s seniors have seen their pensions cut to the bone while health service support and social benefits have been lopped beyond recognition.
With the country ranking fifth in the list of European countries that have most cut back on health spending, and thousands of families on the breadline as unemployment remains impossibly high, the situation looks unlikely to change.
Meanwhile, Eurostat reports that retail spending in Portugal has suffered another setback, with figures for October showing the second largest fall in the eurozone.

“Austerity – an utter disaster”

Yet still we are told by our European paymasters that austerity is necessary. Speaking to German newspaper Die Welt last week, German chancellor Angela Merkel actually said France and Italy had to increase cost-cutting. Her words came only days after the United Nations went on record over the “adverse effects” of this continual mantra, and a month after Nobel laureate in economics Joseph E. Stiglitz wrote at length on his belief that “all the suffering in Europe – inflicted in the service of a man-made artifice, the euro – is even more tragic for being unnecessary”.
Writing in the Guardian, Stiglitz declared: “Austerity has failed. But its defenders are willing to claim victory on the basis of the weakest possible evidence: the economy is no longer collapsing, so austerity must be working!
“But if that is the benchmark, we could say that jumping off a cliff is the best way to get down from a mountain; after all, the descent has been stopped. Success should not be measured by the fact that recovery eventually occurs,” added Stiglitz, “but by how quickly it takes hold and how extensive the damage is that has been caused by the slump.
“On these terms, austerity has been an utter and unmitigated disaster, which has become increasingly apparent as European Union economies once again face stagnation, if not a triple-dip recession, with unemployment persisting at record highs and per capita real (inflation-adjusted) GDP in many countries remaining below pre-recession levels.”
Germany is forcing other countries to follow policies that are weakening their economies – and their democracies, he added. But when citizens repeatedly vote for a change of policy – “and few policies matter more to citizens than those that affect their standard of living” – they are told these matters are determined elsewhere or that they have no choice. Thus “both democracy and faith in the European project suffer”.

Portugal “wrong to win the austerity beauty pageant”

Stiglitz is not the only voice of dissent. Last year economics guru Paul de Grauwe explained why Portugal had been wrong to try and win “the austerity beauty pageant”.
Winning the contest was “a bad idea”, he told Lusa. Portugal would have done better being the worst student in the class. “That would have been better for the economy.”
Instead, Portuguese people continue making sacrifices. “Why? To pay off debts to the rich Northern European countries? This will be explosive,” predicted de Grauwe, “and the Portuguese people will not accept this indefinitely.”
Which is very possibly why Maria Luís Albuquerque refused “even to discuss” the possibility that the Eurogroup could be right to query her arithmetic this week. She stood her ground and won the space to show them that she is right and all the other finance ministers in Europe are wrong.
For now, failure is simply too explosive an issue to tackle.
By NATASHA DONN [email protected]