Wednesday 15 December 2010

what if?

Looking at the news this afternoon:
- Government wants to set a ceiling of firing compensation paid by companies
- Government wants to make easier to get out the tenants that do not pay rents
- Minister of Finance denies role of IMF in Government decisions
- Prime Minister meets "social partners" to present the changes in labor law
I wonder whether it would be more credible if for a month only one announcement would be made - how well the Government finances went that month.
In the end, doing many things at the same time may just mean dispersion, while we really need to focus.
Just an idea for this afternoon, stop announcing more and more policy measures, just show and make sure the ones recently adopted work. Please???


  1. couldn´t agree more with your post, dear Pedro, it's about time to proof if whatever has been done for the last past months did worth!

  2. Is anyone able to explain how can a ceiling of firing compensarion make firings easier or reduce firing costs?
    Being any value above the minimum the result of a free bargaining proccess between the company and the worker, the ceiling just prevents the success of the bargaining process in cases where the worker demands more to accept going away, and the company would be willing to meet his demands.
    I fail to understand the advantage of a ceiling...

  3. Hi,

    I'm neither an economist nor historian but I'm following this blog for some time and decided to say something today, if I am entitled to.

    As a short introduction of myself, I can say I'm an Institutional Sales Broker for fixed income products in a company based in Amsterdam, the Netherlands. I'm here for two years but have brokerage experience of more than 10 years, between equity and fixed income. Nowadays, I trade a little bit of everything that provides a fixed rate, but lately I'm doing a lot of bonds, mainly sovereign bonds.

    I would like to express my agreement with this post from Pedro, which, in my humble opinion, stresses the relevant point of information quality on the relation between the governments and their stakeholders (citizens, creditors, etc).

    Lately, what we've been experience is a surplus of information, being most of it of very low quality, useless for either the investor or the speculator. This overflow of information seems to be directly proportional to the size/trouble of the countries.

    In a first moment, Greece was overflowing the system with information about it's financial performance until they got bailed-out. Same thing happened with Ireland, they announced the bailout and every single day after it, there's huge information coming from Dublin's troubled government (probably for internal consumption). In this last few weeks, it's becoming even more clear that there's no way at all for Portugal to escape the fate of the others - bailout. The acts of this drama are exactly the same, first the denial mottos "we don't need any assistance", "we are not like Greece", second the assumption that something is wrong and finally, the bailout program being approved in the Parliament.

    On the other hand, and although their numbers are a lot worse than the ones from these three, we don't see a lot of information coming or involving them - I'm talking about countries like Belgium or Austria, that are in a lot worse shape than Portugal or even Ireland, but they are able to keep it low, and by that, outside the turbulence (for how long?).

    This is all just a show off... an illusion created to make "the street people" think that they (the governments, the ECB, the European Comission) are trying to cope with it, are really trying to do something... but investors and speculators go by what's real... they look at the figures and decide... and as you know, my economist friends, usually figures don't lie (unless they are coming from Greece) and, in the end, the countries will have to bend and pay for the mistakes they made in the past.

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  5. Paulo,
    All contributions welcome :D

    And yours goes precisely to the heart of the point - too much announcements is less convincing than some hard information on
    what's going on.

    Thanks for your comment.

  6. I totally agree with you, Prof. Pedro. However, I think this counterproductive way of doing things has many explanations:
    - The Portuguese, for some unknown reason (given the country's historical background) have a chronic inferiority complex that makes every government desperate to gain the European peers' (specially those from central and northern Europe) approval. If it pleases the sweds, the danes and other blondes, we'll do it;
    - Though we like being liked, we're still Portuguese - and Portugal is the only country where buying time and repeatedly announcing (endless times!) the same measures actually works. We get the feeling that politicians are really doing something, since the day after tomorrow nobody will remember any of the announcements;
    - As Portuguese, and despite our lack of self-confidence, we do believe we could postpone IMF for at least a few months. And by then, if we get lucky, the crisis will be over and we'd have survived it escaping smoothly between the rain drops. And we do believe we won't be caught!
    - The last reason is also quite typical in our country: we call it "last minute work that fixes everything" or, in our language, "desenrascanço". We feel our economy as a basketball game in which we can come back from 2 points down with a last second 3-pt shoot from the other side of the court... and for some reason, we're not even nervous about that. Shooting from 25 meters while jumping over a 2,10 m bloke? No problem, we'll just do it!

    So, bottom line, I don't think these are signs of desperation. We sincerelly don't feel desperate - do you see anybody turning cars into fire or breaking stores? Of course not. Specially if there's football on TV!
    It's just our smooth way of life...

  7. If I am allowed I would like to make a comment on what was written in a comment.

    When Vladimiro Jorge Silva says "As Portuguese, and despite our lack of self-confidence, we do believe we could postpone IMF for at least a few months. And by then, if we get lucky, the crisis will be over and we'd have survived it escaping smoothly between the rain drops. And we do believe we won't be caught!"

    I would like to highlight that this crisis is completely different from the previous ones. The international financial crisis is somehow finished (despite Spain have to do some write-offs in their banking system). We live now in the aftermath of it where the weakness of those who were living too much beyond their own means are seeing earlier than expected what sooner or later would happen. This international crisis just anticipated what was reserved to happen in Portugal by 2020.

    It's very hard to cope with an economy over debt in all its layers (public, local, corporate, individuals, etc) and with a poor level of productivity. And onwards, to get things worst, the demographic clock bomb is silently moving at a faster pace. 1,3 figure is scaring, special when the second wave of emigration (it eased in the last two years) is about to start as soon as people don't see any chance of decent survival in Portugal. Ceteris paribus the debt per capita will grow steadily in case productivity doesn’t rise.

  8. Labor law in Portugal has been needing a reform since, let me see, forever. Never happened, because no political party wanted to lose votes or lose there "jobs for the boys". And now it will become inevitable. Maybe 2011 will be a year for change and make the Portuguese labor market, more dynamic and productive...
    Which makes me think, Portugal and the Portuguese population love the US, so why not make labor laws like in the US if we love it so much... But in Portugal as they love to say "it's only good for the others".
    The facts for the problem of the Portuguese economy have been here for years, even before I was born. (I am only 26)
    Cut the crap, and do real reforms. Or one day, we will find ourselves in a real revolution, because by my history book 25 of April 1974, never happened, it was just another pat in the back.