Wednesday 23 March 2011

Prime-minister resigns, next steps?

And the announced path has been walked down half-way - the portuguese prime-minister resigned today, after the new austerity measures have been rejected in Parliament.

Does it mean they will not be applied? hardly the case, most likely the measures
will adopted, and since several, if not most, would take effect only next year, there is still time for this or another government to apply them.

Does the political crisis bring a bailout closer? it is difficult to say, but again it is hard to believe it should, as there are not many policy options; in particular, it is not predictable the government entering a spending frenzy to gain elections - people are aware and concerned about the budget prospects and the costs it will entail.

Solution to the political crisis? several options are available, including finding another government solution within the current parliament, with some sort of majority in parliament. We have to wait for the meetings the President will hold with the main political parties, though the first reactions of parties point to elections. If another solution is attempted, then it means a very active role of the President backstage.

Will elections solve political instability? I give a 50% chance it may keep everything the same.

Are elections needed? probably yes, people in the street feel the need to express their views, and probably want some hope and common purpose, let's see how much of it politicians are able to deliver if elections becomes the way forward


  1. The inevitable has happened in Portugal! For years Portugal has lived beyond its means, like many other European countries the bill has finally arrived.......and it’s a tremendous one to say the least. Successive bad governments, a huge public service coupled with a corrupt society equal only to a third world country and huge disparities in wages are only some causes which led Portugal to the state in which it is in!

  2. Does anyone know an article or other summary (in English) of the austerity measures proposed by the soon-to-be-former Prime Minister? I have seen them described as a combination of tax-increases and spending-cuts, but I'm curious about precisely what types of tax increases and spending cuts were being proposed.

  3. @MJF75

    the rough guidelines:

  4. A quick summary of the ones I find more relevant:

    - savings with administrative and operational costs in several areas (health sector, public companies, etc..)
    - fighting fraud in welfare payments
    - hold up of several public investments (roads and schools were mentioned)
    - a tax on pensions
    - no increase in pensions
    - increase in some low vat rates
    - reduction in fiscal rebates to income tax
    - labour market reforms - lowering firing costs (by reducing severance pay)

  5. Obrigado, Francesco and Pedro.

  6. Next immediate step is to embrace for what's coming. WSJ makes the pace as they will deconstruct during the next coming weeks everything about Portugal, shaming us and making us look very, very bad. Today on WSJ: Education!

  7. see here the document in english: