Last week, Portugal’s President dissolved parliament and decided to call early elections for February. The decision by Jorge Sampaio follows four months of a divided PSD administration headed by vacillating Prime Minister, Pedro Santana Lopes, who appears to be unable to control squabbling among his cabinet.
The crisis is believed to have been precipitated by the departure, after a few days in the post, of Santana Lopes’ new sports minister and personal friend, Henrique Chaves. It began, however, four months ago with the departure of the then serving Prime Minister, José Manuel Durrão Barroso, who took up his current post in Brussels as EU Commission President.
During his four months in power, Santana Lopes has overseen a fiasco in the education sector with teachers not assigned to schools until a month after the school year had started. The government was also accused of trying to control the media by silencing some of its most vocal critics, notably the TVI commentator Marcelo Rebelo de Sousa. Most recently, the 2005 state budget met with some raised eyebrows as the government promised tax cuts and pension hikes at a time when the country clearly could ill afford to do so. Reporter Chris Graeme assesses the mood among the Lisbon business community.
LEADING FIGURES in the international business community believe that Portugal is a country worth investing in, despite the chaotic political situation.
Rui Semedo, Chief Executive Officer of Barclays Bank Portugal, says he “believes in Portugal”, while at the same time recognising the country’s weaknesses. Commenting on the current political crisis engulfing the government, which reached a head with last week’s announcement of pending elections by Portuguese President, Jorge Sampaio, he said: “These are short-term problems, but in the long-term the overall situation, especially in the financial sectors, is looking good. We’re still in the process of changing in so many areas – culturally, socially, politically and economically following a lifetime of dictatorship.”
Semedo says that Portugal has faced the painful transition from a closed colonial-based autocratic empire to a free-thinking, small independent country with a new currency and new trading partners. “Just 40 years ago we were a basically agrarian and textile economy here in Portugal with a poor level of education and literacy and we didn’t really have a developed service sector,” he reflects. “Today we have one of the most dynamic financial service and banking sectors to be found in the EU and people’s lives have changed completely, and for the better.”
However, this is not to recognise the country’s weaknesses or the short-termism of successive governments. Semedo believes Portugal needs a new generation of political leaders with the self-confidence and courage to really tackle what ails the country – low productivity, poor educational standards, an inefficient bureaucracy and public administration and constant policies.
The overall optimistic view was also one shared by Gavin Scott of Blevin Franks International, who says: “The present crisis is a temporary one and actually goes to show that democracy is in fact working here in Portugal. I don’t think that the dissolution of parliament and the President’s decision to call elections in February will have an adverse long-term effect. It’s probably a good thing.” Scott went on to say that the fact Portuguese business has recently expressed its displeasure in the way the country was being run was also positive and proved business had a part to play in the way the country should be managed.
He also said that recent changes in the government’s policies towards ‘off shores’ have not proved a disaster for the banking sector. “I think there’s been a lot of nonsense said and written about the effects this might have on the banking and property industry. We’ve not seen a mass exodus of capital or people walking away from their properties. I believe it’s business as usual and no different to what we’ve seen in the UK.”
Scott went on to say that the present problems were really the end result of Durão Barroso’s decision to quit the government and take up his current post as President of the European Union Commission. “Portugal is also being pulled along by the overall financial policies of the European Union and, as such, her hands are tied by strict economic stability pact rules, which state that EU members must keep their national spending under the three per cent benchmark,” he stresses. “These present issues are simply a knee-jerk reaction to circumstances and they will settle down.”
