No more tax increases. Are we sure?
Portugal’s government is not planning further tax increases or “other similar measures”, assured Prime Minister Pedro Passos Coelho during the monthly State of the Nation (Estado da Nação) debate on July 11.
Instead, the executive is preparing its fifth troika assessment, explained the Prime Minister, after being extensively questioned by the opposition.
“Whenever it has been necessary to present unpleasant measures, I’ve been there and done it. If necessary I will do it again,” replied Passos Coelho to the left wing party Bloco de Esquerda (BE) leader Francisco Louçã, one of the biggest critics of the government during the debate.
“Do you think you can get away with not telling us what you’re going to do regarding budget policy; do you think that it’s a government’s secret?” asked Francisco Louçã, who began his speech by questioning the government regarding a possible ministerial replacement.
Saying that the executive is “paralysed by internal intrigue”, the BE leader brought controversial issues to the table involving the Minister Assistant of Parliamentary Affairs Miguel Relvas, including “pressuring the media”, “the sales frenzy at RTP” (the public television channel) and the “dissolution of parishes without consulting the local population”.
On the other hand, the Socialist Party (Partido Socialista – PS) leader António José Seguro focused on the recapitalisation of banks and announced that he will put forward a €3 billion funding proposition to troika for small and medium-sized companies with money coming from the bank recapitalisation programme and the European Investment Bank.
“If there’s money to capitalise banks (referring to this week’s news regarding the recapitalisation of European banks to the amount of €94 billion), why isn’t there money to recapitalise small and medium-sized companies?” he asked.
Challenging the Prime Minister’s decisions, the PS leader said Pedro Passos Coelho “has chosen the wrong path, the path of austerity at any cost”.
He also added that the “Portuguese have upheld their end of the deal, but the government has failed”, whilst referring to the unemployment rise, the cuts in holiday bonuses and the increasing costs of medical care.
Despite the Prime Minister saying that the government will soon be addressing new employment measures and better funding conditions for companies, Francisco Louçã accused the government of preparing “the largest collective redundancy in history” by dismissing 20,000 teachers. He also mentioned other hot topics, including reports that some nurses are receiving less than €4 per hour and the recent doctors’ strike over poor salaries and extensive working hours.
According to the BE leader, these examples show that “the government has failed spectacularly”. He added: “If you’re not capable of attending to the people’s needs, it’s time to leave.”
The wave of accusations continued with the Communist Party (Partido Comunista Português – PCP) leader Jerónimo de Sousa, who gave a damning verdict on the government’s actions, predicting more exploitation, an increase in unemployment, more poverty and less sovereignty.
In response to the criticism, Pedro Passos Coelho established a comparison between Portugal and Ireland, saying that both countries are trailing a similar path to financial recovery.
Using the Irish example, the Prime Minister said he was very confident that Portugal will be back to debt markets in the second half of 2013, thus fulfilling the projections of the external help programme.
Ireland returned to short-term debt markets on July 5 for the first time since receiving the €85 billion bailout in November 2010, after selling €500 million of treasury bills at an average yield of 1.8%.
According to Pedro Passos Coelho, Portugal is only “six months behind” Ireland, as the country officially asked for help on May 2011.
“We are moving at a considerable speed to recover our external credibility,” he said, whilst showing a graph that compared the evolution of interest rates in both countries.
The Prime Minister stressed that the interest rates being charged to Portugal on the secondary market for short-term debt are at an equivalent level to the ones Ireland just sold. “If that doesn’t mean we’re on the path to recovery (…), then you are looking for the worst in everything and trying to scare the Portuguese,” he said.