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António Costa: Europe’s magician of the left?

Upcoming Portuguese elections could be a turning point not only for Portugal but for the left in Europe, the moment when European countries turned their back on years of austerity and decades of neoliberalism. Español

Peter Coville
4 October 2019
Portugal: Portuguese parliament "Assembleia da República" in Lisbon. Daniel Kalker/DPA/PA Images

This Sunday 6th October voters will head for the polls to elect Portugal’s 22nd Government since the Carnation Revolution of 1974, which overthrew a long-serving right-wing dictatorship.

Since 2015 the main parties of the Portuguese left – António Costa’s centre-left Partido Socialista (PS), the Partido Comunista (PCP), and the Bloco de Esquerda – Left Bloc (BE) - have been working together in an alliance mockingly labelled the Geringonca (“contraption”) by a right-wing politician at the start of the administration.

The irony rebounded: the Geringonca has turned out to be a remarkably stable and effective political machine, putting the left – whether under a PS overall majority, or a Geringonca II – on course for electoral victory whilst producing impressive economic results. Much of the stability may be attributed to a written agreement between the parties imposed by the then President, Aníbal Cavaco Silva.

Costa has pulled off the seemingly impossible trick of pleasing the EU and the ratings agencies whilst simultaneously implementing leftist anti-austerity policies. Let’s rewind the video and take a closer look at how he did it: is Antonio Costa really Europe’s magician of the left?

The simple answer is that Mr Costa and his Finance Minister Mario Centeno have strained every nerve to reverse austerity and stimulate the economy. Under pressure from their left-wing allies many of the austerity measures implemented under the previous right-wing coalition (under the supervision of the Troika[i]) have been rolled back.

Cuts to public sector salaries, pensions and unemployment benefit have been reversed, and the minimum wage has been raised from 505 to 600 Euros. Meanwhile various measures have been taken to encourage private investment, whether domestic or foreign, especially in the housing and tourism sectors.

The results are there for all to see. Unemployment has fallen from 12% to 6.3%. Growth has risen to 2.8%, the highest level in seventeen years, the deficit this year is close to zero, and Portugal’s debt has been reduced to manageable proportions. Critically, the recovery has been remarkably rapid compared to countries that have displayed an unshakeable faith in austerity, regardless of the consequences

[i] The Troika of the European Central Bank, the European Commission and the International Monetary Fund, which imposed neoliberal austerity policies in return for a €78 billion bailout between 2011 and 2014.

The recovery has been remarkably rapid compared to countries that have displayed an unshakeable faith in austerity, regardless of the consequences.

Whilst it is true that the Costa Government has benefited from a favourable global economy and low oil prices, the same is true of other countries, and the Portuguese example does seem to add to a growing body of empirical evidence demonstrating that austerity policies do not work, and that economic stimulus speeds up recovery. The investment ratings agencies have responded positively, with Moody’s for example raising Portuguese sovereign debt from “junk” (but who do these people think they are?) to “investment grade”.

The global press have been equally delighted, but with some of the warmest praise gushing from those bastions of “enlightened capitalism” The Economist and The Financial Times, radical progressives may wish to zoom in yet closer on what has been happening on the ground in Portugal.

The Economist or Financial Times perspective on the reality of Portugal - or on that of most other Southern European countries - is a bit like the one you get from 30,000 feet en route to some climate-destroying city-break: you can discern the main features, the coastlines, the sun-lit mountain ranges, but you can’t quite make out what’s in the shadows.

As we drop down to ground level, and go beyond the headline macroeconomic figures so beloved of the free-market gazettes, we see a different reality. As Mickaël Correia has written in an in-depth article in the September edition of Le Monde Diplomatique, there is a darker side to the “Portuguese miracle”.

There is a darker side to the “Portuguese miracle”

An unregulated boom in property and tourism in Lisbon and Porto may have contributed to positive growth and unemployment figures, but it has benefited tour operators, property speculators, and estate agents, rather than locals.

With neoliberal housing policies introduced by the previous government still largely in place, many have been forced to sell their family homes to property developers or rent them out as “Air BnB” apartments, emptying whole neighbourhoods of their historical inhabitants – and their soul. With a lack of public or private investment in key sectors of the economy, it is not unusual for foreign visitors to learn with some surprise that their “Tuk Tuk” driver or “free tour” guide is an out-of-work journalist or university researcher.

In the private sector working conditions remain precarious, despite the efforts of trade unions and the more radical left-wing parties to improve the situation. Many employers use recibos verdes – “green receipts”, a bit like zero hours contracts in the UK, but without the contract – to avoid paying sick pay or paid holidays for their employees.

In Setubal, 50km from Lisbon, and one of the biggest ports in the country, 90% of dockers and other port workers are paid by the day. In 2017, 25.7% of workers were covered by the minimum salary of 600 Euros, in a context of rising rents and property prices.

Yet in a sense these are the lucky ones: between 2010 and 2015 during the period of austerity, 500,000 people – 5% of the population – simply left the country, and most have yet to return. The older and less-qualified never had this option, and many were condemned to dire poverty, from which there has been little relief in recent years.

With the State pension under 300 Euros per month, it is a common sight in the larger cities to see respectable-looking older people going through the bins, often in the early morning so as to avoid public shame. For many inhabitants of the Portuguese interior – those far from the major airports – the situation is equally desperate.

Despite centuries of neglect by central government, the inhabitants of the Portuguese interior continue to feel left behind. The more fortunate get by on a mixture of subsistence agriculture and growing eucalyptus for the paper industry, working in local retail and other services, or in one form or another for local government. It hasn’t been enough however to support a healthy rural economy however, and many have been forced to head for the cities or abroad, leaving villages abandoned and forests uncleared.

Devastating and lethal wildfires result partly from this neglect, and partly, as environmentalists point out, from the monoculture of eucalyptus. In the 2017 fires 112 lives were lost and tens of thousands of hectares ravaged.

Private investment has helped deliver the headline macroeconomic results but has left less privileged groups behind.

There is an underlying theme here: a lack of public investment and an over-dependence on private investment. The Costa Government has desperately sought to attract private funds to offset cuts to public investment, in order to boost the economy and keep the EU and the ratings agencies sweet.

Private investment has helped deliver the headline macroeconomic results and keep the EU and the IMF off Portugal’s back, and has certainly helped some Portuguese, but has left less privileged groups behind, and neglected entire sectors of the economy. Universities and the public health service are at breaking point. Roads – apart from the EU-funded motorways – are often in a parlous state and 60% of rail services are judged “poor” or “mediocre”.

Greens will also be disappointed that the Costa government has failed to invest in solar power, has only produced a weak national climate plan, and has opened the country to fracking and lithium mining companies. In the absence of robust regulations, public and private investment are clearly not equivalent in terms of their social and environmental impact.

More positively, Mario Centeno has used his position as head of the Eurogroup to push back against the EU’s “ordoliberalism”. In the medium to long term, no country, and especially not a smaller country like Portugal, can hope to adopt radical policies without changes to the wider (neoliberal) structures within which they operate. It must be a strategic objective of the European and global left to start to reform those structures.

With the rules imposed by the EU and the constraints of national economic survival in a global economy, Costa’s options were always going to be limited. He is no magician after all, but rather a tightrope artist, treading a fine line between the demands of a liberalised global economy and EU regulations on one side, and the social ambitions of many of his party members and supporters and Geringonca allies on the other.

Left-wing allies have pushed the Costa government from what would have undoubtedly been “austerity light” towards a more “anti-austerity” stance

The result is certainly preferable to a continuation of austerity policies, but it looks very much like Costa has leaned more towards pleasing the EU and the masters of global finance, than in the direction of radical social reform.

On the positive side, his left-wing allies the PCP and Bloco de Esquerda have had the opportunity to develop their ideas on a national stage to a greater degree than would otherwise have been the case, and have pushed the Costa government from what would have undoubtedly been “austerity light” towards a more “anti-austerity” stance. The hope for radical progressives must be that these parties continue to play a role in government after the elections.

The 2019 Portuguese elections could be a turning point not only for Portugal but for the left in Europe, the moment when European countries turned their back on years of austerity and decades of neoliberalism, but here as elsewhere much will depend on the balance of forces on the left.

Until now, the far right have failed to make significant inroads into Portuguese politics, but they are waiting in the wings. The eyes of the European left will be on Portugal on 6th October.

***

Thanks to Andreia Paixão for her comments and suggestions on this text.


[1] The Troika of the European Central Bank, the European Commission and the International Monetary Fund, which imposed neoliberal austerity policies in return for a €78 billion bailout between 2011 and 2014.

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