Friday, 24 September 2010

What to think

1) The negotiations between Passos Coelho, the leader of the main opposition party, PSD, and José Sócrates, the Prime Minister, did not really break down. They were simply interrupted. I hope. The two men are clashing in many issues and one of them is certainly their character - I don't need to have lunch with Sócrates to know that I wouldn’t buy a second hand car from him.
2) The Prime Minister wants Coelho to sign a blank cheque before the Budget goes to Parliament, in a fortnight’s time, and of course the latter does not want to do that: we may guess that he wants his MPs (unfortunately he is not one of them because the former PSD leader blocked his election) to discuss the budget, loud and clear, so that he does not loose his electorate.
3) Passos Coelho should not follow the same people in his party that proposed the "revisão constitucional" which was an ideological, badly designed and unnecessary move. He does not need ideology but pragmatism instead.
4) Cavaco Silva, the President, will ultimately help Passos to get out well from this episode.
5) Passos needs to get the Budget passed and to be able to say that he did what was best for the country.
6)It may be necessary to raise taxes in order to fulfil the deficit target for 2011 agreed with Brussels.
7) Contrarily to common sense widely spread in Portugal and abroad, this country has a good record in keeping its international financial obligations and that tradition is well embedded in both the Socialist and the Social Democratic parties.
8) People are not protesting on the streets, contrarily to Greece, France or even Spain, which somehow prouves the point above.
9) Since Cavaco Silva´s reforms, back in the 1990s, Portuguese governments have at their disposal enough tools to cut expenditure and/or raise taxes, as they wish (tools that Mário Soares, for instance, did not have in the early 1980s).
10) Let's see what happens next.


  1. Analise interessante mas discordo completamente dos pontos 7 e 8.

    Em relacao ao ponto 7 sobre compromissos financeiros internacionais, nao entendo qual o background historico que suporta tal afirmacao. E' preciso relembrar que o pais defaultou varias vezes em 1800s e que so nao defaultou em 1920s porque para o bem e para o mal tivemos uma ditadura que teve como um dos seus compromissos principais cumprir todas as obrigacoes financeiras. Durante grande parte da 1a Republica andamos no limbo entre o default sendo ajudados recorrentemente pela comunidade internacional mas sempre com a corda na garganta.

    Se essa afirmacao tem como base a entrada do FMI nos anos 80 e' preciso notar que o ponto de partida em termos de divida sobre GDP, Deficit, e contexto internacional sao completamente diferentes para pior, especialmente depois dos ultimos 15 anos de governacao socialista (sim eu sei que o PSD esteve la'mas por pouco tempo e com tiques socialistas).

    Em relacao ao ponto 8 obviamente so nao houve protestos porque ate agora o nosso primeiro ministro decidiu nao mexer no lado da despesa,logo, nao mexer nos famosos direitos adquiridos. No minuto em que alguem (PS, PSD, FMI, UE...) comece a cortar na despesa, nao tenham duvidas que vai acontecer, a contestacao social vai comecar em forca.

  2. Concordo com o artigo e com o comentário ao ponto 7 feito por Gordon Gekko.
    Não concordo com o comentário ao ponto 8 porque não estou a ver contestação social se o corte fôr cirúrgico, a saber :
    - 356 Institutos Públicos ;
    - 639 Fundações ;
    - 343 Empresas Municipais e
    - 87 Parcerias Público-Privadas,
    perfazendo um total de 1.425 insaciáveis sorvedores do Erário Público muitos deles provocando uma verdadeira entropia e todos eles servindo, quiçá apenas, para arranjar "jobs for the boys".

  3. Point n.º 5) might not be true also. If he wants to be able to say to the people that he did what was best for the country then maybe he should vote against the national budget plan (if indeed the government comes up with a plan to raise taxes again and to cut public expenses less than it should).
    If he sticks firmly in his defense of the need to severely cut public expenses, and a political crisis is established if the government doesn't accept that, wouldn't that do more for our credibility (because someone in this country would finally be facing the beast) than to sustain in government people that have render themselves completely incompetents, unable to learn with their mistakes, out-of-pace with reality and even dishonest in trying to disguise and dismiss those flaws?
    Politically, Coelho would also set a clear difference to the government and I personally believe that it would bring him the necessary votes to put him in charge in the next election. Furthermore, it would also give him the traction to enforce the big cuts once he got there.
    If he chooses to simply abstain and let go a budget plan that doesn’t sufficiently meet his public demands (no raise in taxes, deficit control through public expenses cuts) then he will lose all of his already damaged credibility.


  4. Pedro,

    could you elaborate on your point 9? Which tools do you have in mind?

  5. on 8) Portugal defaulted 6 times since 1800 (4 in the 1830s and 1840s, one in 1852 and another in 1892. The last two were partial defaults), whereas Spain defaulted 10 times or so (See K. Rogoff, This time is different...)
    on 9) recall that back in the early 1980s there was neither VAT nor IRS, which made harder for governments to control their budgets on the revenue side.

  6. I refer to my previous comment.
    Not having been cut surgery - nor smart - whichever comment from Gordon Gekko (ref. to point 8).

  7. You mean 7) and not 8). Ive read the book but thanks anyway.

    Regarding 8) the party is just beggining. Lets get ready to rumble!