Portugal to take twenty years to get unemployment back to pre-crisis level

As the country is assailed by pre-election promises from all sides, the grim reality is that it will take the best part of 20 years to bring unemployment in Portugal back to pre-crisis levels.

The message is contained in a report published on Monday by the IMF.

It is the kind of detail that the country’s power-makers are doing everything to avoid as they travel the country in vote-catching mode.

In the poverty-stricken Azores fishing community of Rabo do Peixe (Fish Tail), Prime Minister Pedro Passos Coelho talked only of the government’s intention “not to forget the most vulnerable”.

But it is clear that there is a lot more in store – the most vulnerable being the first in the firing line.

According to IMF report, stronger countries like France and Spain are expected to “recover” employment levels much more rapidly than Portugal (France in as few as five years, Spain in 10).

Portugal and Italy are the member-states most likely to lag behind with “serious problems persisting” which could “get out of control and generate irreversible damage”.

For a Europe which insists on the politics of austerity, it’s a hard pill to swallow.

According to Diário de Notícias, “public debt has to be paid rapidly, while conditions are not favourable”.

And as the IGCP public debt watchdog reported only a week ago, far from reducing under austerity, Portugal’s public debt has skyrocketed – increasing by a whopping 36.4% to €224 billion during the coalition government’s four-year term.

While no-one dares mention the likelihood of Greece defaulting on a future “unsustainable” bailout, mumblings behind the scenes that Portugal does not stand a chance of recovery under austerity have never stopped.

Very much like the proverbial ostrich, it is simply a question of what it is that people are prepared to hear.

Writing this week in the nation’s tabloid Correio da Manhã, Almeida Henriques alludes to the “country of debts” and a report on TVI last week showed the true picture of a southern European country incapable of keeping up with a northern European ideal.

“Over-indebtedness has hit even the medulla of the quality of life and dignity of hundreds of thousands of Portuguese families,” he explained, stressing that the idea that the crisis has passed has induced “the wrong perception that these problems are sorting themselves out”.

Just at the beginning of the year, 154,000 families were defaulting on mortgage payments, with new cases appearing at the rate of 71 per day, he said.

In situations like these, how far can protection of “the vulnerable” extend?

State rakes in over €17.8 billion in taxes since January
Against the prime minister’s speeches expounding on opportunity for a new soul for the country – and the need to remember that people’s difficulties are “the responsibility of the Socialists” – comes another “fact” that will leave people nonplussed. In the first six months of the year, the coalition raked in over €17.8 billion in taxes. That’s 4% more than during the same period for 2014, with a huge proportion the result of IRS and IVA (VAT) charges.

If economic growth continues, writes Sol online news portal, the government will be in a position to reimburse the €100 million it took with its unpopular IRS “surcharge”, possibly as soon as 2016.

But the “if economic growth continues” is key.

As the IMF and Brussels have continually warned, Portugal may have been overly optimistic in its forecasts for economic recovery, and certainly still has a long way to go.

Economic growth in the eurozone as a whole is expected to increase, but not as fast as might have been expected in emerging economies, says the new IMF report, as a result of “geo-political tensions, the volatility of the markets and an eventual contagion from the situation in Greece”.

And if Portugal really does face another 20 years trying to return to acceptable unemployment levels, what of the generations that will have come into the labour market at the worst possible time?

According to Público, youth and long-term unemployment prospects “will remain high”, increasing the risk of “hysteresis” – a dynamic lag between input and output which “means that after a profound recession the economy comes out of the crisis, but with a lower level of growth than that which happened in the past”.

“The IMF notes that the percentage of long-term unemployed continues to increase in the Europe of 19 (single-currency states), increasing the risk of the erosion of qualified labour and the foundation of unemployment.

“Equally worrying is the possibility of the creation of a ‘lost generation’, resulting from the deterioration of potential human capital caused by the permanent high rate of youth unemployment.”

In other words, this will be yet another election campaign where promises have to be offset against facts, international reports and the many aspects of life in this country that are already on the brink.

By NATASHA DONN [email protected]

Photo: A trade union (CGTP) protest in Lisbon on July 22 to “fight austerity measures that are leading to the country’s poverty”