nigel.b

It's at:

http://www.economist.com/node/21563352

The reader comments at the end are interesting too.

Ingles

As you will possibly know for Pedro Coelho "Peter Rabbit" this stupid idea was "A Bridge to Far" & he ended up face down on the floor

There's lots of talk & ideas as to what now will replace the TSU increases from all sections of the Portuguese System, one thats being banded about is a 30% increase in tax on Tobacco.

An announcement is supposed to being made today over this.

wait for the bang

steve01

My perception as an outsider living here is that the Portuguese government has done very well to manage th ecurrent financial situation.

But i also love the people i meet here and am delighted that they are brave enough to now make their feelings shown.

Tipping point indeed, but at least Portugal is looking in a better state to go forward than most of the other minor European nations

Ingles

With being argumentive they have placed the onus solely on the working population & joe public just can not take anymore rises in Tax's & cuts in income.
There policy has lead to a large drop in the Fiscal receipts they are getting in & this is now compounding the crisis

steve01

hi ingles,
not in fact true.
A lot of the original tax / financial changes weren't directed at the working population but at the companies/ employers - inevitably this did have an impact across the entire population
The second round of changes is aimed at higher earning / wealthier individuals,
i.e taxes on higher value properties, increased taxes on interest, investments etc.
Its also important to be aware that the people in power in politics, in business, and in fact across the board are at the end of the day just people and inevitably honest mistakes will be made, the corrupt will attempt to profit and the stupid will have their voice heard
Its important to have a good grasp on the facts, not necessarily whats projected in the press.

Ingles

Hi Steve. I will stand by this post ,as I only watch PT TV & only read PT Press I do have a very solid grasp as to what is going on

Hayles

Through my work I had a recent meeting with an economist who specialises in European ecomonies. Lots of charts and stats however no good news. He can't see an end in sight to the downturn, maybe a further 5 years before there is light at the end of the tunnel.

Our children/grandchildren will be lumbered with the problems "we" have created.

All quite depressing but probably a well informed summary from someone who publishes his reseach primiarily for investment houses. Expects Greece to exit the Euro next year and probably Portugal to follow. Spain and Italy too big to exit the Euro and will receive what ever help they require.

Unfortunately Greece and Portugal are too small in economic terms, have high unemployment and a largely unskilled workforce on low wages. Scope to substantially raise taxes is limited and they will probably leave the Euro to be able to control their currencies and policies.

steve01

Hi,
i also have a financial / economics background - fun thing about Economists is that no 2 will ever give you the same answer, and based on the data they research they'll all always be correct.
The key economy in Europe is Germany - basically the only one that matters and its doing well.
Personally i always thought the Euro was a giant mistake, especially the entry criteria , which could never work.
However, there are lots of complex reasons why none of the other countries will ever leave the euro., basically because of the way in which Germany controls the cash flow its never going to happen.
I'm a little fed up of the doom and gloom - for example look at the UK, with record low mortgage rates, low unemployment, realitively high wages (inherited from the boom times of the 80's/90s) people now have more disposable income than at almost anytime in history - they're just being educated not to spend it.
Sadly what always happens at times like this is 'the rich get richer and the poor get poorer'
But in the economy what counts is where you set the crossbar to define who's rich and who's poor

gedscottish

Unfortunately I don't see any light at the end of the tunnel either.
The banks are not giving money out so construction has stopped, this has a huge ripple affect! So if this does not change there is totally no way that Portugal is going to recover, on the contrary... its going to get a lot worse! Higher unemployment, higher expenses and lower wages... watch the crime rate increase as people get desperate!

As for who is affected most, till now without doubt the state worker(the easy target). My wife for example is a teacher in a state school, apart from not having her due wage rise 3 years ago this year she is now 120€ a month worse off, zero subsidy(12 montsh instead of 14 months pay)... she alone will be over 4000€ a year worse off!! The only thing that has increased for her are class sizes and hours teaching. This will affect the quality fo education also(higher class sizes and pissed off teachers).

Ingles

And to add to the doom & gloom every day the PT Gov pay out 30.5 Million €'s more that they receive in various ways.

liveaboard

Here's something I wrote a few months ago. It's in a light vein, but I still don't see why it wouldn't work.


Credit crunch relief;
I’m no economist; but the way things look these days, neither is anyone else.

To me, it looks like this; Portugal hasn’t got any cash, the whole country has a cash drought. The cash has gone to northern Europe to pay for industrial goods made there and bought in Portugal.

The Germans, French, and Dutch don’t want to send the money back, and why should they? They’ve earned it fair and square. It’s their money.

The Portuguese banks are short of cash and aren’t lending; business is grinding to a halt. Anyone who does have cash has probably taken it from their Portuguese bank and sent it to banks in northern Europe for safety. With no new investment, there are no fresh jobs.

So what can we do now? The Portuguese government is in a cash crunch, and has no way of getting out of it. They keep raising taxes, but the population hasn’t got cash either. You can’t get blood from a stone.

The government can’t pay its debts; industries that do exist are going bankrupt because they aren’t paid. Public employees are facing reduced wages, or the sack.

People are willing to work; they want to earn, spend, buy, and sell. But there’s just no money around to do it with.

I think the government should print promissory notes, government secured credits.

They would use these to pay outstanding government bills, starting at say 50% S-credits with Euros paying the other 50%. They could pay a portion of wages this way too, and new hires could be conditional on accepting 90% or even all of their wage in S-credits, until the government has managed to balance its books, and can pay in Euros again.

The important thing is that the S-credits would be accepted for paying all Portuguese government fees and taxes; so retailers could accept S-credits knowing they have a secure value. With IVA at 23%, every retailer could accept up to that amount of S-credits without having to worry about a thing. They would just use their acquired S-credits to pay their IVA.

IVA on S-credit purchases would still be collected of course, payable in more S-credits.

If a business found they had too many S-credits, more than they need to pay their IVA and taxes, they could trade them onwards.

Over time, more retailers would accept the credits, since that would be the only way to maintain business competitiveness. Wholesalers might start accepting them if their employees were willing to accept them as wages, or part wages at least.

Of course, if the government issues too many S-credits, they’ll be getting too many of them back as tax, and therefore they’ll receive less Euros. If they’re too exuberant, they would finally get only S-credits back in tax receipts. So they’ll have to be conservative in the number of S-credits they issue.

Since retail fuel and energy cost is mostly tax, S-credits could be easily accepted there.

Finally, a market would emerge for S-credits, or Escredits. They would have a floating value against the Euro, depending on supply and demand. They would be loaned and perhaps even speculated on. They would have their own interest rate.

If it goes on for too long, it might even be necessary to issue a full range of Escredit notes and coins.

The country folk would just call them Escudos of course.