This week ten years ago, Portugal asked the Troika for help. It was on Wednesday April 6th, 2011, that Jornal de Negócios laid the foundation stone for the announcement of the interview with Finance Minister Teixeira dos Santos. The state minister announced that it was necessary to make use of the “financing mechanisms available within the European framework”. Confirmation would come hours later, in the evening, by the voice of Prime Minister José Sócrates. “The government decided today to submit a request for financial support to the European Commission” without which Socrates would declare that it was no longer possible to guarantee “the financing conditions of our country, our financial system and our economy”. Socrates, who had tried to avoid this result for the past few months, threw the towel on the floor. It would also be the beginning of the end of his political career.
What has happened since then? How will this decade be remembered?
The first finding is known to everyone. In return for the necessary funding, the Troika has issued us with a Memorandum of Understanding. The social costs were enormous. Hundreds of thousands of unemployed, a wave of immigration reminiscent of the 1960s, a society that was amazed – and often angry – at what was happening. 2011-2013 was one of the most difficult periods in our recent history.
The second finding is less obvious. I am speaking of the consistency with which our country has managed to keep its finances in order over the past decade. Look at the budget deficit. In 2011 it was 7.7% of the gross domestic product (GDP). It followed a downward trend until we hit 2019 with a surplus of 0.1% of GDP. The financial portfolio had several members – Vítor Gaspar, Maria Luís Albuquerque, Mário Centeno – but the course remained largely unchanged. It is true that the Covid-19 pandemic brought an element of uncertainty, but there is nothing to believe that the current owner of the financial portfolio intends to change course. The same applies to national debt. It will begin to decline in 2014 and will reach 116.8% of GDP in 2019, the lowest level since the Troika entered Portugal.
This consequence is all the more noticeable as this decade has developed in two at first glance completely different political cycles and one can even say with regard to the Troika that they are antagonistic: the government of Passos Coelho from 2011 to 2015 and that of António Costa from 2015. On the level of political discourse, the difference could not have been greater. When Passos Coelho explicitly made the Troika’s agenda his own, António Costa made “austerity” a rude word. Behind the official portrayal that the recovery of the Portuguese economy – and the resulting reduction in debt and deficits – was possible due to the end of austerity measures that led to more growth and revenue, Costa and his “apparatus” partners applied a recipe on, everyone knows that now. Since the economy has been growing since 2014 (0.8%), the “gadget” has not affected the main objective of consolidating public finances. He stuck to austerity measures. But it was an austerity measure very different from Passos Coelho’s. As a recent article by Catherine Moury, Elisabetta De Giorgi and Pedro Pita Barros explains, Costa’s austerity policy was a “secret austerity policy”. According to the authors, the austerity measures of Costa and its “Apparatur” partners are “less visible austerity measures – namely with more indirect taxes and a significant decrease in investments”. In other words, Costa explicitly distanced itself from austerity measures and implemented this through measures that more or less went unnoticed, at least until the outbreak of the pandemic.
After all, the presence of the Troika in our country had unexpected political consequences. From the “Gerigonça” on the left to the rise of the new liberal and illiberal right, our party system was subjected to a real stress test. Much has changed left and right in this decade, and in large part because of the intervention of the Troika.
What should one think about the future ten years later?
First of all, don’t go back to the situation ten years ago. Asking outside help three times in three years to finance our economy should be a lesson to us. It is important to understand why we get into this situation. Whistling to the side is not enough. We need to identify the root of our problems and start guidelines that will begin to solve them.
The social suffering of the Troika and its actions will remain in our collective memories for many years to come. It’s the blackest stain of this decade. But despite everything, we managed to get around. If there is one lesson to be learned for the future, it is this
On the other hand, it is a testament to the minority of our democratic sovereignty that the country is conditioned to the preferred income of the financing units. We have to carry out the necessary reforms ourselves. Of course, as the examples by Passos and Costa make clear, there are many ways of reforming and guaranteeing the goal of budget consolidation. But it must be the Portuguese who decide, not a troika of foreign experts.
Ten years later we are finally facing a new economic and social crisis. This time the virus is responsible. However, the pandemic should not make us believe that all of our problems will end when the vaccination of the population is complete and the famous group immunity is guaranteed. Do not go. Not least because many of them existed before Covid-19 and it was just a matter of leaving them uncovered. From this perspective, the government’s stimulus plan is the touchstone for the next decade. Is it responding effectively to our problems? Is this plan enough to prevent Portugal from having funding difficulties again in the future? And last but not least, does this plan contain a new development model that will lead us into a fairer future with more freedom and more sustainability?
The social suffering of the Troika and its actions will remain in our collective memories for many years to come. It’s the blackest stain of this decade. But despite everything, we managed to get around. If there is a lesson for the future, this is the right one. Despite all the differences that divide us, we have to fix the house. Under penalty of others who do it for us.
The author writes according to the new orthographic convention