Portugals António Costa has too much of a good thing

LISBON — Surveys often show the Portuguese rivaling Greeks and Bulgarians for the title of Europes gloomiest people. Yet since Prime Minister António Costa took office 18 months ago, it feels like the land of fado and saudade has been popping happy pills.

Costa has overseen a return to robust economic growth after a decade of recession and stagnation.

The budget deficit is the lowest since democracy was restored in 1974. Unemployment stands in single figures for the first time since the eurozone debt crisis engulfed the country in 2010. Tourism and exports are booming.

The European Commission last month agreed to remove Portugal from its excessive deficit naughty list, where Lisbon had lingered since 2009.

Adding to the party atmosphere, this football-obsessed country was crowned European champion for the first time last summer; crooned its way to victory in the Eurovision Song Contest after 49 years of failure, and got its man placed at the head of the United Nations.

The latest Eurobarometer poll has 66 percent of Portuguese expressing satisfaction with the life they lead, double the rate four years before.

As the positive data rolls in, the government is coming under pressure from unions and the left to speed up a rollback of austerity measures.

“All this good news is starting to make me feel ill,” columnist Miguel Esteves Cardoso wrote in the daily Público newspaper. “We werent built to handle so much happiness.”

Costa too is having some difficulty digesting the surfeit of success.

As the positive data rolls in, the government is coming under pressure from unions and the left to speed up a rollback of austerity measures introduced by Costas center-right predecessor during the years of crisis.

“Its time to swap the bicycle for a motorbike, so we can speed up the recovery,” declared Arménio Carlos, leader of the CGTP-IN, the biggest union confederation, to crowds of cheering protesters Saturday.

Juggling act

Carlos led a “day of struggle” that brought thousands to the streets of Lisbon and Porto to demand higher wages and pensions, shorter working hours, an end to short-term contracts and a reversal of liberalized labor laws.

Arménio Carlos, leader of the CGTP-IN | Mario Cruz/EPA

“This government must not forget the sovereign will of a people that voted to demand a break with the policies of exploitation and impoverishment,” said Carlos, whose union is close to the Portuguese Communist Party (PCP). “This government has to listen to the workers and respond promptly to their problems.”

He pointed to the rising incidence of strikes to illustrate the unions evaporating patience.

The main teachers unions have declared a shutdown for June 21, in the middle of high school exams, unless the government meets demands that include freeing up salary scales and hiring more staff.

Magistrates are threatening to close the courts unless they get more money.

Public services ground to a halt on May 26 due to a strike by civil servants who promised “the struggle will continue” unless the government accedes to demands for higher wages, more overtime pay and a 35-hour maximum work week for all state employees.

Union demands are backed by the PCP and the radical Left Bloc party, whose support is essential to keep Costas minority Socialist administration in power.

“The government has made commitments on labor rights which have not yet been met,” Left Bloc leader Catarina Martins said at a recent weekend union rally. “The time has come to fulfill those fundamental promises to defend the workers.”

The left and the unions are flexing their muscles in an effort to secure concessions as the government prepares the 2018 budget, due to be presented in the fall.

In his two previous budgets, Costa successfully juggled measures to nurture growth and mollify leftist anti-austerity demands, while reassuring Brussels and Berlin that Portugal remains committed to fiscal prudence.

Vulnerable to shocks

Despite the increasing clamor, Costa and Finance Minister Mário Centeno insist they will continue the balancing act.

“We have to continue to be extremely responsible, like weve been up until now,” Centeno said last week, in response to calls for a spending spree.

“If we resist certain temptations that are being spread around, well end this parliament with all our economic indicators exceeding expectations,” Centeno said in a social media exchange with voters. He did throw a bone to the left in the shape of tax cuts for low-income workers.

The government is confident that, despite the grumbling, the far left is unlikely to provoke a crisis.

Opinion polls show Costas Socialists riding high with over 40 percent of voting intentions, while both parties to the left have lost ground since the last elections in October 2015.

Should there be new elections, 66.2 percent of voters would trust Costa to stay on as prime minister, according to a poll published May 14 in the Correio da Manhã newspaper.

Portuguese Finance Minister Mario Centeno | Patricia De Melo Moreira/AFP via Getty Images

Portuguese Finance Minister Mario Centeno | Patricia De Melo Moreira/AFP via Getty Images

Despite the spate of good news, the government knows Portugals economy remains fragile and vulnerable to external shocks. It wants to use the recovery to cut the national debt, which at 130.4 percent of gross domestic product remains the third highest in the European Union.

Centeno aims to cut the debt ratio by 2.5 points this year. With that he hopes to persuade the three main international rating agencies to lift their assessment of Portuguese bonds above “junk” level, easing borrowing costs and giving the government more financial wiggle room.

Optimistic Portuguese

Its not just the Portuguese whom Centeno is making happy.

German Finance Minister Wolfgang Schäuble — who barely a year ago warned that the Socialists fiscal laxity was pushing Portugal toward a new international bailout — now hails Lisbons progress and dubs Centeno the “Cristiano Ronaldo” of EU finance ministers.

Praise from the eurozones fiscal-hawk-in-chief has fueled speculation — rife in Lisbon — that Centeno is in line to replace Dutchman Jeroen Dijsselbloem as president of the Eurogroup of finance ministers.

Costa, meanwhile, says the country can handle more good news.

Suddenly optimistic Portuguese are now dreaming of Cristiano Ronaldo continuing the winning streak in the World Cup next year.

“There are those who say weve had too much good news,” Costa told a party rally earlier this month. “Unfortunately, the country has been through such bad times that we need a lot of good news before the country can regain its composure and confidence.”

Portuguese year-on-year growth hit 2.8 percent in the first quarter, according to Eurostat. Theres talk in Lisbon that the annual rate could top 3 percent this year for the first time since the 1990s.

Exports are set to get a boost from Volkswagens giant Autoeuropa south of Lisbon, which already represents 1 percent of Portugals GDP, and is set to increase production by 20 percent this year as a new model comes online, and could double its production by 2018.

Tourism revenues, which rose to a record €11.9 billion — or 6.4 percent of GDP — last year, are set to increase by a further 3 percent in 2017, according to the World Travel and Tourism Council.

Suddenly optimistic Portuguese are now dreaming of Cristiano Ronaldo continuing the winning streak in the World Cup next year, plus, of course, a repeat of Salvador Sobrals musical success at their first home-ground Eurovision.

Original Article

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