PORTUGAL: Food Aid for 'New Poor', Extra Wealth for Nouveau Riche

• by Mario Queiroz (lisbon)
• Tuesday, August 02, 2011
• Inter Press Service

And while vendors of luxury vehicles worry that they cannot fill their customer' orders as quickly as they would like, the Food Bank Against Hunger is facing a similar problem: it cannot keep up with the demand from the hungry knocking at the door.

Up until 2009, the food bank only served the poorest families. But now middle class families, swallowing their pride, are coming forward to ask for food, medical assistance and spiritual support.

The non-profit Portuguese Association for Consumer Protection (DECO) receives daily requests for help from people who cannot keep up payments on their debts to the banks and other financial institutions. In June alone, the homes of 3,000 families were repossessed because they defaulted on their mortgages.

In the past 25 years, Portugal managed to escape from its position as a peripheral country on the margins of global trade, and seemed to have a promising future. But then the economy plummeted in the 2009 crisis.

Inevitably, thousands of middle class people became the 'new poor', as they were hit hardest by the tax hikes, wage cuts, the loss of the holiday bonuses — two extra monthly salaries a year — and lay-offs without notice.

Since it joined the EU in 1986, Portugal has made remarkable progress. However, economists are now saying that its economic development was more illusory than real.

As Portugal received billions in structural funds from the EU, easy credit financed mobile phones, cable television, freeways, cars and houses, all bought on the instalment payment plan.

Agricultural and industrial development were sacrificed to unbridled consumerism, creating a huge sector of nouveau riche, who took pride in the fact that the country has the greatest number of freeways per square kilometre and the biggest shopping malls in Europe, along with modern football stadiums and other shiny new constructions.

But this apparent wealth is a mirage, bearing no relation to economic realities in Portugal, analysts say.

After three decades of living far beyond its means, the time has come for Portuguese society to pay the bill for excessive consumerism and the lack of vision and strategies for real development, on the part of politicians and the business community, they warn.

The crisis reached such proportions that credit, which before 2009 was offered almost automatically, without any assessment of the risk of non-payment, is now systematically denied to the same individuals, small businesses and small farms that, DECO complains, were previously the victims of incessant campaigns by the banks to convince them to take on unlimited debt.

The consequences soon made themselves felt. Cut off from credit, hundreds of companies declared bankruptcy, ruining the owners of small businesses and tossing thousands of workers into the ranks of the jobless.

Portugal's economic indicators are now terrible: unemployment stands at 12.4 percent, the highest level in 30 years, and the annual inflation rate of 3.4 percent is the highest in two decades.

At the same time, however, the assets of the 25 richest people in Portugal grew this year by an average of 17.8 percent, to a combined total of 25 billion dollars, equivalent to 10 percent of GDP in this country of 10.6 million people, one-quarter of whom are subsisting below the EU poverty line.

The U.S. Misery Index (the unemployment rate added to the inflation rate) ranks Portugal fifth in the world among the countries with the greatest decline in economic well-being, surpassed only by Egypt, New Zealand, Ireland and Ukraine.

In the first quarter of this year, 3,104 companies went bankrupt, according to information released Jul. 29 by the Portuguese branch of the Compagnie Française d'Assurance pour le Commerce Extérieur (COFACE), a French export credit insurance agency.

The government of former socialist prime minister José Sócrates (2005-June 2011) adopted drastic measures to contain the spiralling deficit. But even more stringent adjustments were implemented as part of the painful austerity package introduced by his successor, conservative Prime Minister Pedro Passos Coelho.

In addition, fiscal stimulus measures to boost demand have been scrapped, and it is assumed the private sector will have to step in on that front. 'It's a simple economic theory, with a monetarist vision: let the money flow to whoever knows how to use it, in other words, the business community and the banks,' Mario Gomes, a professor of economics at the University of Lisbon, told IPS.

The rightwing government now in power 'has in a short space of time shown its deepest intentions: to radically eliminate part of the social state, cut wages and dismantle state companies, which are vital to economic stability,' he said.

Are these policies similar to those followed in Britain by then Prime Minister Margaret Thatcher (1979-1990), based on the theories developed by the Chicago school of economics and prominent economist Milton Friedman? IPS asked.

Gomes replied: 'It is an ultra liberal strategy, like a combination of the reforms implemented by some South American dictatorships in the 1970s and 1980s, but introduced more gradually.'

Over the last 10 years Portugal's economic growth has been slow, and the economy went into recession this year and will remain so into 2012, according to forecasts. 'The development cycle that started with integration into Europe in 1986, expanding foreign trade by taking advantage of labour cost differentials, is exhausted,' Gomes said.

With EU funds, 'Portugal modernised and expanded infrastructure, solved its housing problems and doubled the value of its tourism industry,' he said.

'But although it had plentiful resources to modernise the productive sector, it neglected industry, agriculture and fishing, causing deindustrialisation,' he criticised.

Most economists concur with this analysis. They say cutting back on public spending is not sufficient to stem the country's economic decline, and that measures are urgently needed to expand industry, develop services and rationalise farming.

The two powerful trade union federations have announced plans for protests and strikes, while independent movements vow they will be a constant thorn in the side of the Passos Coelho administration.

João Martins, a young activist belonging to the Geração à rasca ('Generation in Trouble', or 'Desperate Generation') movement, told IPS that the 'indignant' people's protest movement in Spain - also called the May 15 Movement - emerged out of 'our organisation, which arose spontaneously in Portugal two months earlier than in Spain.'

The Generation in Trouble movement attracted thousands of young people, invited through the on-line social networks and mobile phones, to a demonstration on Mar. 12. They were quickly joined by parents, grandparents and others, and in just a few hours 300,000 people took over the centre of Lisbon, Porto and six other Portuguese cities, chanting the slogan 'a rua e nossa' ('the street is ours').

Martins predicted that 'the savageness, blindness and insensitivity of this government's measures will inevitably provoke another March 12, and the street will once again be ours.'

© Inter Press Service (2011) — All Rights ReservedOriginal source: Inter Press Service

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