Tuesday 25 September 2012

The U-turn

Mind you, the U-turn by the Portuguese Government reveals more about its internal functioning than about its determination to proceed with the Memorandum agenda. The proposed changes in the Social Security Contributions (TSU) were designed by a small inner circle of a couple of cabinet members and a few other government advisors, and they were made under the impression that public opinion and opinion polls didn't matter. Certainly that the Prime Minister was aware of what was going on, but he did not pay enough attention to the true extent of the proposed measure as he notably trusted those in charge for the plan. The U-turn has to be analyzed in that context. The proposed measure - which would have implied a direct income transfer from employees to employers - was indeed outrageous. The way the Government is doing its business didn't allow for the necessary political control. There is no need now to put further pressure on the Portuguese Government so that it proves its willingness to proceed with the troika Memorandum - for the sake of the Portuguese public. What we need now is pressure on the Government so that it pays more attention to the fact that too much austerity is counterproductive, as the IMF and other institutions have been saying for more than a year now.
PS: an excellent follow-up.


  1. After reading what you refer to as an excellent follow-up, and paying special attention to what you have underlined in the FT article, I can assume that you agree that "Job creation will be boosted only if the social security burden on companies is cut significantly". It would be interesting to know your views on how you would propose to fund this cut. You also keep going back to the point that too much austerity is counter-productive. I just don't see, given the enormous imbalances that have been accumulated over the last decade, what the alternative is. Given where we stand in terms of our sovereignty and ability to fund ourselves, what would you do? Lastly, this idea that the cut in payroll tax is transferred directly to employers is something that I find very difficult to accept. How do you know that is is not going to the customers of the company, or the suppliers or even other workers? Is it really that simple?

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