
Portugal’s Economic Revival - Tomte
https://www.nytimes.com/2018/07/22/business/portugal-economy-austerity.html
======
jventura
As with many things, I think the truth lies exactly in the middle! Let me
explain..

In 2011, Portugal applied to an IMF bailout. What do you do when you beg
someone for their money? You comply! You don't come out for the streets saying
you won't pay! You say creditors exactly what they want to hear. You (seem to)
reduce costs, you cancel holidays, you go even beyond what creditors ask you
to do. You get smart, you understand you're in a weak position and take the
best advantage of it. You don't do like the Greeks who let their egos be
greater than their brains, and be on the spotlight for being over-spenders by
saying they won't pay their creditors. That's what the government did in
2011-2015 and it worked! We got out of the spotlight and stop being perceived
as over-spenders..

In 2015 a new government was elected. With the influx of tourists, and being
seen as people who saved some money (and learned their lesson), the new
government was in a really better position to try "the revival". They started
reinvesting and giving the appearance that we are growing (and some things
are, but also government spending). And it seems to be working so far...

So, what really seems to work? Both things. When you're in a weak position you
comply, and then when you get to a stronger position, you negotiate. So both
type of governments were needed at exactly their time.. A good timing - I
think that was the key to the current success!

~~~
galfarragem
Our _sucess_ boils to a tourism increase (driven from political instability in
other countries and a very laxed tax system for foreigners), cheap oil (that
gave room to increase taxes on petrol) and historically low interest rates.

~~~
slig
> a very laxed tax system for foreigners

Do you think this is one of the reasons (or the major one) that so many
Portuguese people live abroad? [1]

[1]:
[https://i.redd.it/2683a6np1g621.jpg](https://i.redd.it/2683a6np1g621.jpg)

~~~
rjtavares
No. The reasons some many people live abroad, IMO:

1\. A culture built on world exploration. Our golden age myth is sailors
leaving the country to find new lands. Our great epic book is "Os Lusíadas", a
celebration of the discovery of a sea route to India by the Portuguese
explorer Vasco da Gama inspired by Virgil and Homer's epics.

2\. Many people left the country between WW2 and 1974 (due to a ruling
dictatorship, a colonial war, and economic difficulties). These were mostly
uneducated people that went to France, Germany, Switzerland to become low wage
workers.

3\. A newer wave of emigration (of much more educated people) due to low
salaries in Portugal. I know a lot of people (mostly engineers) that more than
tripled their wage simply by moving to more developed countries: Germany, UK,
Sweden... Similar to moving to SF/NY when you're in rural US.

~~~
slig
Thank you for the insight.

------
munchor
As a Portuguese person living in Portugal, this article is quite misleading.
Portugal is one of the countries with highest income and social security taxes
in Europe (not to mention VAT and other types of taxation).

The economy is growing, yes, mainly thanks to tourism. However, austerity is
still much in place and taxes have only gone up since 2008 for middle and
higher class (for low class people the conditions are much better of course).
In order for a country to have a "revival", it needs to be growing in multiple
industries but Portugal is evermore dependent on tourism which doesn't scale
that well. Entrepreneurship is very limited to due to insane levels of
bureucracy, high taxes, difficulty in firing people and most talent leaving to
the UK/Germany/Switzerland in search of better salaries and better "value for
money" taxation.

~~~
afterburner
Austerity doesn't mean high taxes. Austerity means cutting social programs and
public investment.

~~~
whoisnnamdi
This is incorrect.

Austerity can involve tax increases, spending cuts, or combinations of the
two. It’s not limited simply to spending cuts.

That said, it very much matters what “kind” of austerity one engages in, as
research indicates that tax increases and spending cuts have different
respective effects on an economy.

~~~
TheOtherHobbes
Like most economic principles, there’s a big gap between theory and practice.

In reality Austerity is defined by tax breaks for the very rich, combined with
spending cuts and privatisation - i.e. economic enclosure, debt peonage, and
asset sweating - for everyone else. Sometimes that includes tax increases, but
if som it usually means indirect taxation.

Austerity is purely ideological. Even the IMF acknowledges that recent
Austerity regimes have underperformed expectations while examples of stimulus
spending have had the opposite effect.

~~~
geezerjay
> In reality Austerity is defined by tax breaks for the very rich, combined
> with spending cuts and privatisation

This is objectively false, and a poor atempt at forcing a particular spin on a
very objective definition.

Looking at Portugal, the bailout program enforced tax increases exclusively on
the middle and upper class, along with publix sector workers who are by far
more priviledged than private sector workers. For example, the bailout program
saw the introduction of a new tax bracket for the richest taxpayers which
forced a 53% income tax rate.

And also privatizations are implemented to avoid additional austerity pushes
by providing the government with one-off sources of free cash thus avoiding
further spending cuts or tax increases. Therefore, they are in fact an
alternative to austerity, not a consequence.

> Austerity is purely ideological.

This statement is so mind-numbingly wrong that it boggles the mind how anyone
in this point in time could be so disingenuous or clueless to keep parroting
this silliness.

Let's look at Portugal, who doubled its sovereign debt fron 60% of the
nation's GDP to over 120% in about 5 years prior to any mention of austerity,
and did so by piling a string of yearly deficits of over 10% including a
structural deficit of around 3%.

If your state is so dependent on overspending that it needs loans after loans
to keep working and pay up salaries, who in their right mind will argue that
they don't desperately need to cut spending and/or raise taxes to avoid going
bankrupt or even to keep functioning?

If austerity was actually "purely ideological", how exactly would it be
possible for Portugal to keep their 10% spending deficits?

------
Empact
The article refutes its own premise:

Net spending cuts, rather than stimulus: “Mr. Costa made up for the givebacks
with cuts in infrastructure and other spending, whittling the annual budget
deficit to less than 1 percent of its gross domestic product, compared with
4.4 percent when he took office. The government is on track to achieve a
surplus by 2020, a year ahead of schedule, ending a quarter-century of
deficits.”

Growth is slowing, minimum wage is lowest in the eurozone: “Growth is cooling
from 2.7 percent last year, as Mr. Costa keeps public investment at a 40-year
low to cut the deficit. While he restored public sector salaries to previous
levels, they have barely budged since before the crisis. And the minimum wage
of 580 euros a month, although up, remains one of the lowest in the eurozone.”

Gov cutting taxes as well: “To cement the growth cycle, the government is
putting what little investment it makes into targeted initiatives like tax
breaks for foreign companies and training for the unemployed.”

~~~
choteck
Well, the article is just stating the truth, that is the deficit is going down
mainly because public investment in that last few years is being almost null
(mainly in infrastructure) and now Portugal can go to the markets after seeing
removed the "trash" title from the public debt. (Not) The only problem is that
a big part of Portugal's infrastructure is starting to be outdated and should
have have been renewed.

The actual government is mainly taking advantage of tourism growth and the
stimulus from the Central European Bank
([https://www.ft.com/content/7514a734-6fbe-11e8-92d3-6c13e5c92...](https://www.ft.com/content/7514a734-6fbe-11e8-92d3-6c13e5c92914))
and is selling the recent growth as being a consequence from their measures of
lowering taxes (which is not exactly true, also -
[https://www.pordata.pt/Portugal/Receitas+fiscais+do+Estado+t...](https://www.pordata.pt/Portugal/Receitas+fiscais+do+Estado+total+e+por+alguns+tipos+de+impostos-2765),
and yeah I know that if more people have a job more the total amount of taxes
collected is higher) and others.

Being a Portuguese living in Portugal, it is obvious that the economy is
improving but that improvement is not sustainable IMHO.

~~~
hn_throwaway_99
> The only problem is that a big part of Portugal's infrastructure is starting
> to be outdated and should have have been renewed.

Meh, you should see the sad state of affairs in the US.

------
TheLuddite
That's a bit overoptimistic...the real estate prices in Portugal are CRAZY
because of the tourism boom + shared economy, the taxes on food and especial
gasoline are really high, so the Portuguese go to Spain(a country that's
richer) to shop, as it's cheaper...salaries are a bit of a joke, like making
more than 1000EUR is to be considered lucky.

It's true that the "Contraption" in the government is working better than
Greece or Italy, but still...

~~~
pcardoso
Portugal != Lisbon. You can get reasonable prices everywhere else.

~~~
PedroBatista
Too bad they don't get reasonable jobs everywhere else, or a job at all.

~~~
pcardoso
Not true.

While Lisbon has a big chunk of the jobs, other cities also have plenty of
opportunities. YMMV of course.

I work remotely, so I’m outside the local job market, but I still get plenty
of offers for local companies in my mid sized city.

------
andrepd
The premise of the article seems to be: "In 2015, it cast aside the harshest
austerity measures its European creditors had imposed, igniting a virtuous
cycle that put its economy back on a path to growth."

The thing is, less than 3 years is absolutely not enough time to draw any
conclusions. Much of the improved results are explainable by an uptick in
tourism, and low interest rates, therefore attributing it to this government's
policies seems premature. In truth, no true changes are being made. Taxes
remain high (which is not necessarily a bad thing in itself), public spending
remains inefficient in some areas. No actual, _really meaningful_ reforms have
been made, no truly new ideas. The old "systemic" problems, if you will,
remain. Corruption remains an issue. Beaurocracy has been somewhat improved,
but still needs lots of changes. The judiciary remains slow. Etc, etc.

------
zepearl
Is it true that in Portugal when you issue a receipt as a shop (e.g. when some
person buys something and you issue a receipt for the client) the client gets
automatically a number for a national lottery from the machine which is
directly connected to some central government's lottery & tax department (kind
of controversial, hehe)?

A portuguese colleague told me a few years ago that this was one of the
measures taken by the government to lower tax evasion (and I thought "cool,
why not") but I don't really know if that's true nor if it's still used
nowadays.

~~~
fddr
It is true. The prize used to be a car, now it is government bonds.

It is fully automatic. You just tell the cashier your tax id number, and you
are set. No need to keep the receipt.

~~~
zepearl
Thx!!!

Yes, I now remember my colleague mentioning a car :)

But well, I wouldn't have enough faith in XXX cashiers. I'd want a hard
receipt (confirmation of submission on paper with some kind of checksum which
I could confirm online if I wanted to).

~~~
fddr
You do get a paper receipt, which is just your normal sales receipt (which
usually I just throw away immediately).

You can also check all your receipts online, on the Finance Ministry website.

~~~
mynegation
Screw the car. I want my receipts downloadable!

~~~
sergiosgc
Portugal is moving to digital receipts for individuals in 2019. If you give
the cashier your VAT ID, no paper receipt is produced, and you may download
the receipt from your IRS dashboard.

Anonymous paper receipts will remain valid, indefinitely (i.e. they are not
being phased out).

------
jayalpha
I would take this news with caution and let's see how long this boom lasts.

This being said, I don't live in Europe but I speak Portuguese. I plan to buy
an apartment in Europe. Lisbon was always a serious consideration. But prices
are through the roof. Golden Visa did not help either. I am also skeptical on
having too much money invested in real estate in a, comparably, poor country.
Real Estate taxes are a bargain compared with some US states. This could
change (outch!). But basically they priced me out already. Overtourism does
not help either.

------
airstrike
I remember when Brazil was "taking off", president Lula was called "the man"
by Mr. Obama, Eike Batista was heralded the modern Brazilian industrialist and
the seemingly limitless "pre-salt reserves" was going to turn the country into
a leading oil producer.

Since then, we've learned this short-lived economic boom was really just
attributable to outsized Chinese demand for commodities which went away as
quickly as it came about. The Workers' Party spent its ~16 years in power
fostering the centuries old crony capitalism that has fundamentally defined
that South American nation since it was a Portuguese colony, throughout its
19th century monarchy, its 20th century republic, the congress-appointed
military regime in power between 1964 and 1988 and all of the democratically
elected presidencies since.

Eike Baptista was indicted and convicted for fraud and embezzlement, his
companies sold for pennies on the dollar.

Lula's anointed political successor, Dilma Rousseff, was ridiculed, impeached
and couldn't even win a senate seat in the last elections.

Lula himself was indicted, tried and convicted, along with hundreds of other
politicians – not to mention the countless more the country hasn't yet gotten
around to convict.

The populace radicalized to the point of destroying families and friendships
before fatally electing a bizarro president – when the alternative was keeping
the Workers' Party in power for another 4 or 8 years, Brazilians opted instead
for a diabolical Faustian-Orwellian blend.

I'd love to hear Obama's take on how wrong he was. And I caution others to
resist the temptation of extrapolating from a handful of moderately successful
economic years, thinking their countries have fundamentally changed overnight.

You know what causes extreme changes overnight? A revolution. Brazil hasn't
experienced one, and I doubt Portugal has.

~~~
PedroBatista
The article is just a fluff piece, stating some facts but sugarcoating their
full meaning.

Pretty much everyone in Portugal ( other than the usual ones ) rolls their
eyes when the read stuff like this.

Although not at the same level of Brazil, politicians in Portugal do the same
thing depending of how arrogant they are in not getting caught. It's full of
bottom feeders trying to get some cushy position for themselves, I think it's
our main problem right now, the sheer amount of money sucking parasites from
top to bottom.

------
rdl
Interesting fact: you can become a resident (and then citizen) under the
Golden Visa program by buying 350-500k EUR of property in Portugal.

~~~
rdl
(Which is incidentally approximately free if you have access to capital, since
your returns from airbnbing the right property, net of management costs, will
exceed the mortgage. There's risk, obviously, that the rental market could
change or real estate value could drop, but it's a pretty good deal. Each EUR
350-500k includes spouse and dependents, so it's up to 6 people. Very popular
with people from China right now.)

------
api
Like many libertarian leaning people I used to be a fan of "Austrian" type
economics. In the past few years as a result of watching both the recovery and
the cryptocurrency experiment I've changed my mind. I now think that Keynes
was at least largely correct in the essentials.

I think two things trip people up. One is blind extrapolation of good personal
and business financial advice onto macroeconomics. It's clear to me that
macroeconomic systems seem to have their own rules. Secondly I think some of
the disdain for Keynesian ideas comes from dislike of the power concentration
inherent in central banks.

The latter is still IMHO a valid criticism. There might be different more
transparent or decentralized ways of achieving what central banks achieve. But
the overall history of macroeconomics seems to fall on the side of Keynes and
his successors.

~~~
nikanj
The biggest problem with Keynes is a psychological one.

It makes sense to spend more during tough times, but it's a career suicide for
a politician to suggest tightening the purse strings when the times are good.

In essence, modern Keynesian politics oscillate between "The times are bad, we
have to spend more", and "The times are good, what do you mean we can't afford
to spend more".

~~~
ScottBurson
> it's a career suicide for a politician to suggest tightening the purse
> strings when the times are good

Not necessarily. In 2014, California Proposition 2 (originally 44) passed with
over a 2-to-1 margin [0], reforming and expanding the "rainy day fund" created
by 2004's Proposition 58. California now has almost $30B in surplus [1].

[0]
[https://ballotpedia.org/California_Proposition_2,_Rainy_Day_...](https://ballotpedia.org/California_Proposition_2,_Rainy_Day_Budget_Stabilization_Fund_Act_\(2014\))

[1]
[https://www.politifact.com/california/statements/2018/dec/18...](https://www.politifact.com/california/statements/2018/dec/18/jerry-
brown/does-california-have-budget-surplus-nearly-30-bill/)

------
vasco
This is absolute crap. We've been growing a bit under the european average
which we've always done, other than during the crisis, at which time we
greatly fell behind. We haven't recovered any ground to the rest of the
european zone. Ireland for example has pretty much recovered and in the last 4
year grew 50% more than Portugal.

There's a name for a rule that escapes me right now, on when the news writes
about a subject you know about, that's when you realize all news reporting is
utter crap. This was that moment for me.

------
isoos
Portuguese people in this thread mention an alternative narrative to the
events. I'm curious: is there any English-language site that you'd recommend
to follow about Portugal?

~~~
guilhas
Life is visibly better in Portugal

------
mudil
[https://outline.com/qnEaGZ](https://outline.com/qnEaGZ)

------
agumonkey
Let's see how lithium mining will do then.

------
wetpaws
Obligatory [https://outline.com/qnEaGZ](https://outline.com/qnEaGZ)

------
ziont
is this because they decriminalized drugs? seems like when the government lets
people do what they want, it helps the economy.

~~~
siquick
You can't "do what you want", there is just no jail time for possession.

~~~
ziont
> no jail time for possession.

isn't that the definition of 'do what they want'

if you are not going to put people in jail for drugs

people will do drugs.

~~~
platelminto
People will do drugs regardless, the threat of jail has, historically, not
worked.

What Portugal showed was that punishing them is actually counterproductive.

~~~
jeffbax
Portugal has of, if not the, lowest drug usage and overdose rates in the
world.

~~~
ziont
ah interesting.

