Portugal ranks top of the world … for those with money

 In Economy

It’s that time of year again, when the government has to present its economic plans: tell us all how well we’ll be doing in the next 12 months and where we’re headed. And it’s all “looking good” in spreadsheet terms, though outsiders will argue “and so it should”. The big issue is, “is Portugal doing as well as it should be doing?” And there, the jury’s undecided.

First, the good news: the Socialist government expects 2.2% growth next year, and a near zero budget deficit.

Unemployment will be down to around 6% (incredible, when one considers the figures for the crisis years) and public debt at 117% of GDP (again, a far cry to the 130+ percentages of the bailout years).

Says Reuters news agency: “Although the growth forecast is a tad lower than 2.3% expected previously, it is well above the International Monetary Fund’s latest projection of 1.8%, released on Tuesday as part of its global economic growth forecasts.”

Reuters appears very much ‘pro’ the achievements of the current government, saying that since coming to power three years ago, it “has managed to combine fiscal discipline with measures to support growth, while reversing most of the austerity policies imposed by a centre-right administration during the 2010-14 debt crisis”.

But a fascinating interview with tough-talking chief investment officer of Denmark’s Saxo Bank suggests the government hasn’t really managed anything at all.

Steen Jakobsen is well known for being one of the least orthodox voices in European finance, and he certainly hasn’t disappointed in the latest 3,000-word tome delivered on Monday by Observador.

The bottom line is that Portugal is one of the best places in the world to be … as long as you have money.

The government, in Jakobsen’s (informed) opinion, has basically taken advantage of “the luckiest conjugation of factors” that have seen the economy grow.

He said: “It really matters very little what politicians do. On the contrary, most of the time the influence of politicians can be prejudicial. At best, they neither add nor detract from the rest of society.”

The ‘problem’ with Portugal is that, in his opinion, we could already have done so much better.

“I am an enormous fan of Portugal, but I feel there exists almost pride here in that nothing changes. It’s frustrating, because this should be one of the most prosperous countries in Europe and one of the best in the world. The Portuguese are hardworking, adaptable. They have this sun, tourism, a good level of English, and Portuguese is one of the most spoken languages in the world.

“I feel like saying Portugal should be ashamed of not being among the three or four best, most prosperous countries in the world, not just in wealth but in dynamism.

“I have no doubt that it ranks among the top three countries for foreigners.

“For those who have money, it is one of the best societies in which anyone could live.

“But that really isn’t the principal factor we should be looking at. How is the quality of life for Portuguese people?

“What I see is that Portuguese people no longer have the financial means to buy homes in their own towns, and employers are strapped by fiscal uncertainties, regulations and excessive bureaucracy.

The problem, says Jakobsen, is that we don’t have leaders who ask the question: “what kind of country will Portugal be in 10 years’ time?”

And here’s the rub of all the ‘budgetary consolidation’ and ‘fiscal growth’: if it precludes investment in key areas – like education and health (both of which are currently wracked by strikes and outraged underpaid workers) – it is barely worth the paper it’s mapped out on.

Education particularly concerns Jakobsen who explains that it’s “easy to work out what the most productive countries of the world have in common” and that is an “educational system that prepares people to be agile, productive and qualified”.

Considering we are well into October and thousands of schoolchildren are still without a full complement of teachers or a timetable running properly, the warnings about education will strike a chord in every parent’s thought processes.

As for the “lucky conjugation of factors” that has contributed to this government’s perceived success, this has included the European Central Bank’s policy of purchasing debt (a measure designed principally to save Italy from economic collapse), the great boom in tourism and “new money” pouring in from the Golden Visa programme.

None of these factors are set in stone: ECB’s Mario Draghi is set to retire next year – and there is no guarantee his policies will survive him, Portugal is already feeling the keen heat of competition from other holiday destinations, and the Golden Visa programme has recently been slated (again, this time by the latest report by Transparency International and Global Witness) as a race to the bottom when it comes to allowing rich criminals into Europe with no questions asked beyond the colour of their money.

How does Jakobsen feel about this lucky government’s luck holding?

“It seems obvious to me that things will be worse,” he told Observador. “As there is no increase in internal credit, all contributions for the acceleration of the economy will have to come from outside. Interest rates will be higher, the ball of credit within financial markets smaller. It’s very unlikely that from an economic point of view things will be better.

“In other words, for this government, it would be better to have elections now than in a year’s time.

“As things deteriorate, people will become increasingly aware that this government, in reality, has done nothing,” he repeated, adding that “some will continue to accept it, but it would be much better, whatever government comes, for there to be greater pressure towards the modernisation of this country.

“It’s important that there should be a sense of urgency.”