Anti-austerity, tourist boom and a pink house in Lisbon
By Alicia Prager • last updated: 27/09/2018
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Alicia Prager
Portugal has turned the page on its 2010-13 crisis, the
International Monetary Fund said in its latest annual assessment of the
country’s economy, in which it praised the Portuguese efforts. But Inês Silva,
a young woman from Lisbon, is concerned about the impacts of another crash.
Her home country implemented a rigid reform programme and
recovered comparatively quickly from the crisis and is today governed by a
centre-left government, which prides itself for the success of its
anti-austerity policies.
However, the remaining limitations within the social system
and the stark increase of prices in Lisbon and Porto continue to put pressure
on the cities' residents. With a minimum wage of €580 per month, the rising
costs are barely affordable, the European Trade Union Confederation said.
“When we are talking about the crisis, it is always about
the past. But the question is if we are prepared for a next crisis,” says
Silva, who lives in the Lisbon neighbourhood of Alvalade. For the last 10 years
of her life, the euro crisis had been the main focus — in the news, during
school lessons, at home.
As a political science student at the Universidade Nova de
Lisboa, discussions with her family and her classmates got her interested in
the topic, said Silva, walking across the Praça do Comércio — the square at the
shore of the Tejo river, once a symbol for the trading power of Portugal. These
days have passed long ago.
Already in the years before the crisis hit, the Portuguese
economy was struggling with a loss of competition and its high debt. As a
result, the country introduced reform packages long before the troika entered
the country.
This included cutting the 13th and 14th salaries of public
servants as well as freezing their next career steps, which hit Silva’s family
hard since her father works in the military’s administration. Her mother’s
income was reduced significantly as well, as she is working as a freelance
translator for the state. The four-person household often only had around €1200
per month.
Both Silva and her younger sister felt the problems at home.
Around the height of the crisis in 2011 and 2012, the two teenagers stopped
asking for money for lunch at their school canteen. “We just started to bring
sandwiches instead,” Silva recalls.
But things have gone uphill since then: Unemployment, which
peaked at 16.18% in 2013, has today fallen to 7.1%. Economic growth also
returned: in 2017 it reached 2.7%. Additionally, investments increased by 9%
and exports grew by 7.9%.
How did Portugal bounce back?
The ingredients for Portugal’s success story include the
adjustment programme as well as the global economy’s recovery and the European
Central Bank's low-interest rate policy. In addition, the cautious relief of
economic restrictions on the population and the rhetorical repackaging of
austerity measures by the government of António Costa have regained consumer
confidence.
According to a Eurobarometer study, in 2012 around 72% of
the respondents in Portugal believed that the country was facing a negative
future, today that percentage has fallen to 10%.
Also in the apartment on the 3rd floor of a pink house in
the neighbourhood Alvalade, were Silva and her family live, the atmosphere has
cheered up. However, she remains cautious about general optimism. She says she
is worried when she thinks about TV advertisements by financial institutions
for new loans.
Meanwhile, on the boulevard of Rua Augusta, tourist groups
push past each other through this central pedestrian area. Large colourful
pictures on the menus of restaurants display the offered dishes while bakeries
tempt passerby with pastéis de nata — a Portuguese delicacy. The number of
tourists has risen from 8.3 million in 2013 to more than 12.7 million in 2017.
The boom is both a curse and a blessing. On the one hand,
tourists bring a lot of money into the country so new jobs are created and
investments in real estate surges. Thereby, exports of services have
compensated an increase in goods imports. On the other hand, prices rise
rapidly. Renting a flat — especially in the city centre of Lisbon — is hardly
affordable for the majority of the population.
For Silva, this means that she will keep living with her
parents for the next years, at least until she has finished her studies. But
Silva is one of the lucky ones, whose families live in Lisbon. For the
thousands of young people moving to the capital from other parts of the country
each year, finding a place to stay has turned into a nightmare and student
housing is rarely available.
Also, the places she and her friends used to spend their
free time at became overcrowded and more expensive, like the party
neighbourhood Bairro Alto or the area around Intendente. “And there are rumours
that the town hall wants to sell the land of one of our favourite viewpoints,
Miradouro da Nossa Senhora do Monte, to a hotel,” said Silva.
At the same time, tourism has also created many job
opportunities for the population, including students. Silva, for example,
started giving free walking tours through the downtown area. However, many jobs
in tourism are precarious and don’t offer career possibilities. A country
report by the European Commission, recommends increasing incentives to issue
permanent contracts. However, it is going in the right direction.
"2012 was a turning point with the establishment of the
ESM and the launch of the Banking Union," says Thomas Wieser, former
president of the Eurogroup. In addition, the ECB has expanded its monetary
policy, stabilising the expectations of the market.
The big goal now, Wieser said, is to move towards an
integrated financial market. An important step has already been taken with the
introduction of the single banking supervision. If problems accumulate,
supervision no longer looks away, as it is not involved with the interests of
the state and the bank. In addition, work should continue on reducing the
potential for contagion between states and banks, for example by allowing banks
to operate beyond the national borders, Wieser added.
A big challenge regards the search for solutions for the
divergence between the eurozone states, says Ricardo Paes Mamede, an economist
at the ISCTE University Institute in Lisbon. This happens as the value of the
single currency is too low in countries like Germany, which significantly
strengthens their competitiveness. In the short term, this cannot be solved -
it is about the economic structure of a country: while Germany has specialised
in technology, Portugal has long focused on textiles and footwear.
Aiming to better cushion the social costs of a future
crisis, proposals call for a common unemployment insurance scheme that can be
resorted to in an emergency — but what this could exactly look like is anything
but a consensus.
Silva, currently in her final year of undergraduate studies,
now thinks about pursuing a master’s degree. She wants to specialise in either
migration, anthropology or conflict and peace studies, possibly at a university
abroad.
In her home district Alvalade, there is one café next to the
other along one fo the main avenues, in between small shops. However, many of
them stand empty. Although it is a wealthy neighbourhood, many businesses had
to shut down. The debt crisis has changed Alvalade — as well as the rest of the
country.
"We missed the opportunity to use the crisis in order
to reshape the eurozone," Inês says.
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