What will become of Portugal if it doesn’t grow its economy?

The seasoned politician and former prime minister Pedro Santana Lopes says that Portugal has largely survived on European Union handouts. But with the geopolitical landscape changing he asks how will Portugal survive if the EU collapses?

Text Chris Graeme Photo: ICPT

We are living in times when the word unpredictability takes on a whole new meaning says Pedro Santana Lopes, one-time mayor of Lisbon and prime minister.

And the current mayor of Figueira da Foz, who spoke at the International Club of Portugal last week at the Hotel Marriott, says that while he doesn’t want to be a pessimist, he feels that Portugal’s governing bodies, its municipalities and companies face staring into the abyss if the country doesn’t wake up to a chronic lack of productivity which is seeing Eastern European nations overtake her.

“There is a certain popular saying: “Who knows what tomorrow will bring”, but in this case it really is true, especially from what we’ve seen in recent years in so many areas — crises of the individual, of faith (or lack of it), within the International geopolitical context, public health, financial system; everyday brings us new unexpected news”, he said pointing to Credit Suisse, another institution considered too big to fail, but certainly would have had UBS and the Swiss Government not intervened,

“I don’t like to be pessimistic, but we have to be realistic, and honest. For many years Portugal knew what its challenges were, but pretended they weren’t there”, he warned adding that this malaise was not only confined to Portugal, but also the EU.

“What strikes me is that there is this feeling that we don’t have the strength to deal with predictable factors. It’s like we’re all living in a boat whose engines are broken down. I feel that in this crises the EU comes across as an entity that is looking for something close to perfection, with a very functionalist, step-by-step approach”.

Europe’s energy dependence on Russia – foolish

But the reality, he hinted, was quite different and much darker. Pedro Santana Lopes, who is very much one of the new generation of ‘Old Men of Restelo’ gives the example of Europe’s energy dependence on Russia as an example of blind and foolish faith.

On energy, the founder of the Partido Aliança – which describes itself as personalist, liberal and European party, but has largely been torpedoed out of the political waters in Portugal like the Lusitania by populist parties — explains that the EU in practice was “forced by circumstances to take certain actions which it really should have taken before”.

Its dependence for energy on just one part of the world (Russia) “particularly when it doesn’t belong to our alliance block”, is, he said, something that today is understood, but should have been understood by those whose vocation was to manage our cities, and seen beforehand and not in hindsight. “It was a disastrous error as we all now realise”. But the man whose main feat at the helm of Lisbon City Council was an underpass tunnel at Marques de Pombal which reduced chronic city-centre traffic jams, sees other errors.

China, Russia and defence

Take the western world’s dependence on China for its production system. The EU is now in the hands of these “entities”, he lamented.

“If we think about Germany and my contemporary when I was Prime Minister, Gerhard Schroder, who from early on struck deals with Gazprom and Mr. Putin, and then Angela Merkel who for years shared this illusion that Russia was on a road to becoming a member of NATO one day, we can now see that was an error”, said.

It was also “an error” for the EU not to strengthen its military capacity. Its security and defence policy is lacklustre, while its foreign policy since the treaties of 1993 – there were so many that year, I’m not sure which he refers to — in terms of its common defence policy, the state of its armaments too led to a disastrous lack of investment in Europe’s military capabilities.

Portugal too was not left off the hook as one of the counties which had made the “least effort on its defence capacity”. Just 1.3% of GDP in its budget last year. (2022)

“I remember Donald Trump at the NATO meetings asking that the EU countries make an effort to increase defence spending to 2%, and whatever you might say about Donald Trump, he was right, but the NATO countries never wanted to seriously tackle the matter seriously”, he lamented.

Essential existential questions that get ignored

Then the newspaper columnist turned to the essential question of what resources Portugal provided, not just in military terms but in terms of tackling its own problems of productivity and competitiveness.

“It really does baffle me how the opposition doesn’t understand that we need to be discussing the these essential questions, but allows itself to get caught side-stepped over headlines in the newspapers about one minister of State or the other, and want to compete with other political parties in being the first to be called to parliamentary hearings to answer questions about issues of a scandalous nature”, he said.

“It wants to call the Minister of Finances (Fernando Medina) because of things that happened at City Hall (when the minister was mayor), yet don’t ask what measures and policies that it wants to take to increase productivity so that we don’t continue to fall down in the European ranking tables of GDP per capita and revenue per capita”, he said intimating that Portugal’s political class wasn’t focused on the problems that really mattered for Portugal.

But he didn’t spare the horses in its his criticisms of the electorate either. “It seems that the Portuguese don’t want to know about these matters, and yet it is an essential issue because we don’t have the money to meet all the responsibilities that we want the State to take, yet we don’t care when the State doesn’t take responsibility”, he warned.

“I saw news the other days asking why pensioners didn’t receive more money, and that women earn 7% less than men, or because companies now have to pay for TAP, but no-one talks about the revenues side of things. People just talk about expenditure”.

Questions for the future

Pedro Santana Lopes asked the broader questions. “How are we going to increase national revenues? How will the Ukraine war end? What will follow when the war does end? How will our forces be on an international level? How will the EU be? Will it federalise or disintegrate?

“We’re living in a new world in terms of unpredictability. Sweden and Finland have joined NATO, but NATO ten years* ago was talking about a possible cooperation with Russia. (*Actually, it was In 1994 – Russia joined the Partnership for Peace program, and on 27 May 1997, the NATO–Russia Founding Act (NRFA) was signed at a NATO Summit in Paris, France, enabling the creation of the NATO–Russia Permanent Joint Council (NRPJC).

“I remember Mr. Putin in 2004 when we had a conversation that lasted for an hour, most of it in German, and he made it quite clear on Ukraine joining NATO: “Ukraine no!”

NATO already had Bulgaria, Poland, and Romania. But for five years the world was working in the direction of further NATO enlargement to include Ukraine.

“Now we have a world that is completely turned upside down. We feel the ascendancy of China which is unpredictable by nature, and the United States weakened with the Trump and Biden families attacking each other in lawsuits. The West is weakened and Portugal is stuck in the middle.

European funds

The Government, businesses, and municipal councils are, he said, all talking about European funds. Since 1989 Portugal has received around €140Bn, which per year is a “very considerable” sum; almost 2% of GDP.

“The question we really have to ask, because we don’t ask it, is what would we have done if we hadn’t had these European funds? What big projects would be launched if we didn’t have European finding?

Yet, he regrets, Portugal continues to make “the same mistakes” it has made over the years. An example is building heath centres in every district with 1 per parish on average, yet there aren’t the patients or the staff to man the health centres that do exist.

And Pedro Santana Lopes cast a final ominous warning: “We also have think what would happen if the day comes when the EU disintegrates. The geopolitical landscape and strategy has changed, and what then if European funding ends? If the EU funding stops, what will become of Portugal if we don’t grow?”

Of course, Pedro Santana Lopes does have a valid point. But I fear no-one will listen and he will join such august figures as industry leader António Saraiva, economist João Duque, and economist Henrique Medina Carreira on the beach at Belém shouting at the waves and drowned out by the seagulls.

Photo: Pedro Santana Lopes (Left) with Manuel Ramalho, President of the ICPT.