The Financial Times has railed against the socialist management and plans for Portugal’s economy and mentions the unspeakable words 'second bail-out.'.
In a stern article published today, the pink organ’s thrust is that António Costa’s administration suffers criticism from Portugal’s business leaders for concentrating on vote-grabbing initiatives rather than getting to grips with the country's serious economic problems.
The focus is on the possibility of a much-feared second bailout which may be needed if the Costa plan fails to achieve the many short-term financial targets set by the Troika of lenders and the European Union, as described by the FT’s European Editor, Tom Barber.
If an application was received bu Europe for a second bail-out, the FT suggests that any hard-nosed analysis of Portugal’s income, expenditure and financial prospects might well lead to the conclusion that the country, like Greece, is unlikely ever to repay the loan.
According to the Bank of Portugal, the country is in the eye of a perfect storm of “meagre economic growth, falling investment, low competitiveness, persistent fiscal deficits and an undercapitalised banking sector that owns too much of the nation’s sky-high public debt.”
With the Socialist government coming up to completing its first year in power, the FT and Portugal’s right wing conveniently forget the damage that the coalition/Troika austerity programme wreaked across swathes of small businesses, needlessly raising unemployment while companies took advantage by raising the price of necessities such as water, fuel and travel.
The FT points out that only one of four ECB-recognised credit rating agencies maintains an investment-grade rating for the country. This is the thread that allows Portugal still eligible for ECB purchases of government debt.
Part of the socialist plan involved returning money to workers’ pockets, recapitalising businesses and banks and cleaning up the mess left under the carpet by the Passos Coelho administration, notably TAP, Banif and Caixa Geral.
With undertones of Thatcherism, Costa’s reforms do not go deep enough to be called Conservative but his desire to give money back to those that earn it essentially is the basis of the Thatcher revolution that saw deep cuts to income and corporation tax in the hope that the money would circulate around the economy, which it did to good effect.
Costa however is averse to State asset sell-offs, unlike his predecessor and sees it the role of government to own businesses without the discipline of having to make a profit.
Given time, Costa’s plan might have worked but with the country owing 130% of GDP and rising, he does not have the luxury of time.
