Friday 14 September 2012

Portugal is in shock

These days, everybody in this country is shocked in a way or another and I am choked in my own way, of course. The reason for all that shock is the Government’s plan to change the social tax (Taxa Social Única), which will lead to an increase in labor's taxation by 7 pp (from 11 to 18%) and a reduction of employers taxation by 5.75 (from 23.5 to 18%; the remaining being an increase of the aggregate from 34.5 to 36%). Such change will imply a massive transfer of wealth from workers to employers, to the tune of 2.2 billion euro annually. But even more shocked I get when I read in the Portuguese press that the IMF's Director, Christine Lagarde, has stated that Portugal is "a success story in the eurozone". Following massive cuts in public wages, massive tax increases, and massive cuts in health, education and unemployment compensations, that success is measured by a 6.6% deficit over GDP, and unemployment estimated to reach 17%, by the end of the year. I wouldn’t call that success. One my just wonder how the 6.6% deficit is esasily compatible with a much lower unemployment rate (12, 13%?, your pick). Both staggering figures are the direct consequence of the way the crisis has been tackled by the close and unhealthy association we have in this country between the troika and the Government. And now everybody is also worried about what will happen politically in the near future.

1 comment:

  1. A definitive cut implants a completely different mentality into consumers from a temporary measure. PSD is not only killing the Portuguese economy, but also paving its own way to the grave.