Wry & Dry

Sinking into a Marxist abyss: Portugal

Whereas Venezuela is already at the bottom of a Marxist abyss, it looks as though Portugal, that cute country in the bottom left-hand corner of Europe, may be about to slide into one.  It's a bit complicated, but the centre-right government has been toppled by a surprising alliance of left-wing parties barely 11 days after it took power.  

"Here we go again," Angela Merkel is probably thinking.  "Just when I thought it was safe to take ein kleinen Urlaub in Bayern ..." [2]  

The Portuguese left-wing government alliance looks to W&D very much like Greece's Syriza, that is, a collection of pragmatic socialists, dreamy socialists and unreformed Marxists.  But firstly, consider Portugal's fiscal position: there is a pulse, just.

In 2011, Portugal became the third eurozone country after Ireland and Greece to be bailed out by the EU.  Four years later, it has left the bailout scheme but only after implementing stringent austerity measures in return for EU funding.  There have been steep tax increases, deep cuts in welfare rights, pay and pensions, as well as changes to labour entitlements.  After three years of recession, the economy grew last year and is expected to again grow this year. 

Portugal 2

It certainly seemed that the corner had been turned.  And that over the next few years some of the austerity measures would be unwound.

But not fast enough for Pedro.  The pain has been too much.  And so the new government promises to reverse all government-employee salary cuts mandated by the bailout deal; boost welfare spending and raise the minimum wage; halt planned cuts to the corporate tax rate; and renationalise some companies that were privatised in recent years.   The new government claims the spending will pay for itself by boosting growth.  But these were precisely the policies the led Portugal to crisis in the first place.

All of which means increasing the budget deficit.  Portugal will once again hold out the beggar's bowl.  And Angela will once again miss out on her vacation. 

But wait, there's more.  On 20th December, next-door neighbour Spain has a general election.  Oh, dear.  Contagion?