Monday, November 12, 2012

A video about Portugal (and Greece, too?)

I received this very impressive video, allegedly produced by Portugiese Conservatives with the aim of having it broadcast in Germany. Frankly, I was taken by the video. Thus, I sent it to a friend of Portugiese origin (now living in Canada) and asked him for his comments, which are below. It seems to me that parallels can be drawn between Portugal and Greece.

Comments by a Portugiese
Well, I think we have a case here not of propaganda but of how the truth and the facts are displayed and juxtaposed. Perhaps some comparison between Portugal and Greece would be a good framework to depart.

Both countries did advance upon EU accession and the flood of funds from Brussels, living standards rising even faster once the Euro was adopted. But, I recall long before the crisis seeing comparative statistics where Portugal (with Greece trailing not far behind) had the highest share of public sector weight in the then EU with Ireland having the least. This weight factor was not just in terms of gross costs but the actual total number of employees in the public sector. In a 12-month calendar year, the law stipulated that all employees (public and private sector) were paid 14 salaries, 1 extra at Christmas and 1 in the middle of the summer. The social umbrella was complete and pretty comprehensive, meaning that it was prone to abuse.

Like Greece, there are numerous incidents of "pensions" being paid to spinster daughters, who never worked a day in their lives, when the parents passed away. Undoubtedly, under a social umbrella welfare system provisions need to be made for those in need and it is not in the 9 or ten thousand such cases that the system was weighted down. More to the point is the "nomenklatura" in Government irrespective of the party in power since the 1974 revolution. Let's say that you Klaus are the Sub-Secretary in the Ministry of Public Works. You draw a salary for your actual position, you are given a good German car with a uniformed chauffeur who gets paid overtime because he is on duty 24/7 not just to drive you on official functions but also your wife and children. You have a very well appointed restaurant in the ministry costing anywhere from 1/2 to 1/3 of the cost in a normal restaurant. And, of course, you have a government pension. Now, you are appointed "Delegado do Estado" (Representative of the State) in e.g. the boards of the electricity or ports or highway state companies or even more such companies, something that is not uncommon. You not only draw additional salaries for these 3-4 year "temporary" posts, which may consume a maximum of 2-3 hours per week of meetings, but you also accrue additional pensions from each of those posts. Since many of these posts are sourced by the party in power from the ranks of MPs  elected (called "Deputados"), if reelected for a successive 4-year term, i.e. 2 terms as an MP, and subsequently lose in a third election, you now have a pension for life that rises yearly pursuant to inflation.

To use a personal example, my Father was a Chemical Engineer and head of the water company. Pursuant to statutory requirement he retired with a very good pension at 65. No sooner did he retire when he was asked by the Government to sit in the board of a "mixed capital corporation" where the 51% was private. So he did and there being an agreeable meeting of the minds over the years, he resigned from that Board of his own accord at age 83 on the grounds that "he felt a bit tired". Long preceded by my Mother, by the time he passed away at age 90 -- actually 1 month after he turned 90 -- his pension was manifold what he had ever earned in active service. While my sister that followed me to Canada, her husband, my wife and I would shake our heads at this situation, which my brother-in-law called a "Disneyland situation", both my Father and my only other sister who never left Portugal, where she and her husband work for the Ministry of Education, saw nothing wrong with the system. What happened in the case of my Father is actually a "minute" situation -- where he actually worked half-days every day for that Board since I read many of his reports and commented on them -- compared to some of the scandals that only became seriously revealed upon the onset of the crisis.

In the private sector, agriculture almost disappeared under the so-called "EU standards". So, our oranges that taste and smell phenomenally have spots in them and may not be so golden as Florida's or California's. The farmer gets paid for not farming and not harvesting. Wine, brandy, Port, Madeira, liqueurs and eau-de-vie survive nicely and represent nice domestic and export revenues. However, go to any supermarket and it is flooded with the same products from the rest of Europe plus South Africa and South America at competitive prices. The textile sector, once vibrant and very good, is gone or at best haute couture "boutique-like". The shoe manufacturing sector, since it is a real brand quality name, continues to flourish but is a pale shadow of what it once was, especially in exports. Fisheries, the inseparable sea and the Portuguese of time immemorial, cannot compete with the massive industrialisation of the sector by the Norwegians and the Spanish. Go to any supermarket to buy the indispensable dry salted cod and it is "Norwegian", even though all cod are fished off the shores of Newfoundland since the 15th century.

Industry and manufacturing in general and the financial sector may be traded in the Lisbon and Porto bourses but are controlled and  back in the hands of the few families that owned them during the decades of Salazar's dictatorship. It is almost as though the 1974 revolution never took place. As for the banks, who would seize properties for mortgage arrears, these were still accounted as "live assets" in the balance sheet until very recently when Ireland and, specially Spain, started auctioning such properties. The numbers are staggering all over Portugal, something like 440 homes delivered by hard-pressed owners, who are no longer able to pay their monthly mortgage installments  or seized by the banks on a daily basis. And in the tourist sector, where Portugal, specifically the Algarve, has enormous potential as well as a good tourist infrastructure, the power of the Euro has made it fashionable for the Portuguese themselves not to enjoy vacations in Portugal but in exotic locales. TAP, the national airline is "broke" beyond repair and negotiations of a takeover by Q'Atar seem to have come to a standstill. It no longer flies to Toronto, in a country where one million Portuguese reside, of which 500,000 are domiciled in the general Toronto area and vicinity. But, go to Punta Cana in the Dominican Republic and you will see a posh TAP counter in the airport. Etc.

The above -- with or without the Troika -- has not changed since the Crisis. What has changed is that the 13th & 14th salaries are now gone, statutory age has been increased from 65 to 67 years of age and contributory pensions will be reduced for anyone receiving a pension in excess of Euro 500 per month. What is also changed is the scandal of the current PM -- beloved by the Troika -- telling the educated youth of the country to emigrate, an advice that tens of thousands have already taken to heart and acted upon such that when standing at a certain vegetable counter in a large and popular Portuguese supermarket in my neighbourhood I once overheard two youngsters talking to each other in elevated and cultivated Portuguese while cleaning and stacking lettuce and cabbage. They are most probably illegal migrants in Canada, but they are most certainly graduates of the classical universities of either Lisbon or Coimbra.

The population in general has taken to blaming Germany and/or Northern EU, but mainly Germany, for their woes, an attitude that has not changed but has become exacerbated by the apparent disregard of the Troika for the excesses of the "nomenklatura" at the expense of the rest of the population. Austerity measures are popularly regarded as applying to most and not the minority. Incidentally, in one of my recent posts I had closed it with the quotation that "The law exists to protect our friends, to persecute our enemies and to be applied to its fullest extent on those that are ignorant". The author of that quote is Paulo Portas, the NO. 2 person in the current Portuguese government.

So far, all demonstrations are indeed peaceful with none of the drama we see on TV when it comes to Greece and/or Spain. For how long more, I don't know and let us not forget the armed forces, so far professional, disciplined and in the barracks. They did it before in 1928 putting Salazar in power and again in 1974 toppling the Salazar regime and they can certainly do it again.


  1. What stands out from this post is

    1) Public Sector abuse (governmental and institutional) and expansion in both Portugal and Greece. Since this is where the EU transfers arrive, it is not surprising.

    2) The high cost and losses - in terms of our real and traditional economic sectors - of membership in the EU and EZ.

    3) In both cases the party that loses out is the private sector.

    Greece too lost its textile, ceramic and shoe industries through inability to compete with cheaper Asian imports; its enormously profitable tobacco production was summarily closed down by the EU in favour of planting & artificially sustaining over 2 decades unsuccessful tobacco production in Italy; and the abuses and wastages of the CAP are an international scandal.
    Tourism became expensive too!

    One clear point stands out: EU economic policies and planning have been inefficient and detrimental in terms of the natural strengths of southern economies; and EU macroeconomic planning has been as artificial, protectionist and clumsy as the old USSR & Chinese 5 Year Plans.

    But this is rarely discussed. Instead the EU is treated as a de facto monument of economic wisdom and value.

    Again, where does this leave the private sector? We fund everything in the EU, but our economic activities are skewed by EU mandates and artificially constrained.

    1. I don't know how efficiently the EU Structural Funds were used in Greece (about 135 BEUR since joining) but whenever I ask why Greece's agricultural sector is performing so poorly, I get the reaction that this is "because of the EU". Apparently, the agricultural grants (about 70 BEUR since joining) went to all sorts of things except the right ones.

      Yes, I would agree that the EU does not have a respectable track record when it comes to how to use money. I think about half of their money goes into agriculture and my understanding is that the dividing up of agricultural grants to the major countries is reminiscent of Greek cronyism. Now that the EU has to save money and since none of the cronies will want to give up some of their agricultural perks, they will probably take it from the Structural Funds, the one place which would really be needed these days!!!

  2. Thanks for sharing your friends correspondence regarding Portugal, most interesting. The similarities are uncanny. Extra pay periods, dead people drawing pensions, lots of prestige German cars, buying German subs and pie-in-the-sky stuff from Siemens.