This statement is very far from the truth.
The current acting government actually cut investment spending to record levels as part of their renewed austerity effort, both with higher taxes and slending cuts, that resulted in record low deficit spending.
While the previous goveremt of Portugal focused on higher income taxes focused on the middle/upper class and public sector workers, the current acting government forced increases in gas prices mixed with off-the-bool spending cuts in the form of captivation of expenditures.
The key factor in Portugal's economic turnaround is the fact that the austerity program was actually surprisingly effective at fixing Portugal's problem, as is demonstrated by the fact that the portuguese recession that started way back in 2008 ended in 2014, right before the end of the austerity program.
Saying austerity led to the end of a recession is like saying that cutting costs at your restaurant led to an increase in customers, or allowed you to charge higher prices for your food.
Greece and Italy are fighting austerity because they take the traditional economic stance - government needs to spend tax dollars on increasing investment, education, employment, etc. instead of cutting investment costs and ensuring tax money is channeled to interest payments.
Perhaps foreign investors saw that Portugal was taking its austerity seriously and began to increase investment, reassured their money would be relatively safe. But how could austerity lead to the boom in tourism and exports cited in the NY Times article?
One of the key factors was that the national trade balance became net positive during the period, as the private sector was pushed to invest in exports, but I'm sure the issue is much more complex and can't be pinned down to a single cause.
Nevertheless the undisutable fact is that the recession that started in 2008 and caused the then acting government to nearly bankrupt the state in 2011 with their record public spending push, piling yearly deficits of over 10%, ended in 2014 during the third year of the bailout program. That fact is somehow ignored by anti-austerity critics who insist that no recovery is possible when reality shows otherwise.
Do you think this is one of the reasons (or the major one) that so many Portuguese people live abroad? [1]
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.
Can you elaborate on what or how the tax system is very lax for foreigners?
https://news.ycombinator.com/item?id=18165995
As an anecdote, Madonna is nowadays living in Portugal. Media says the reasons are the Lisbon sunlight and her son wants to learn soccer.
It's not like the creditors were helping from the goodness of their hearts. They made stacks of money off it, off those imposed austerity measures, off (if you excuse the description) of bleeding the working class dry. Let's not forget who profited the most off the situation generated by the European debt crisis: big German banks...
It's in the citizen's rights at least to protest for an alternative solution.
It’s how socialism works. Spend other people’s money on handouts then blame capitalism for the public debt.
I'm not expressing any value judgment on these decisions in this post, but it seems to me the basic terminology is hard to dispute.
By that logic, I assume that in the case of the subprime crisis of 2008, you also think that the culprits are the indebted families, right? Not the banks that pushed loans on people who clearly couldn't afford them, who set up a system that richly rewarded them for that, that hoodwinked their clients and the public, that stacked regulators with friends to look the other way, that stacked universities with "economists" in conflict-of-interest to tout that their practices were a-ok, that paid themselves billions in bonuses with taxpayer money after the working class bailed out their losses... Not those people, right?
>It’s how socialism works. Spend other people’s money
It's always funny to me that the people who get trillion-dollar bailouts to recoup their losses and keep living an elite life of luxury have the gall to call others out on "handouts".
Anyway, you forgot to set that quote over a photo of Margaret Thatcher /s.
That's how an economically careless welfare state works in a capitalist economy. What you are describing is social democracy, which is not the same as socialism and never has been in the history of the movements or any terminology recognised by social scientists.
Socialism is direct worker control over the state and social means of production (to the point where Karl Marx considered the term synonymous to "Communism"), while social democracy is a liberal capitalist economy in which the government (which owns very little social means of production itself) funds welfare programs through taxes.
Lets imagine some democracy votes an incompetent fool into their highest office, who starts making "bad deals". Would you expect other countries to not agree to those deals for reasons other than their own interests?
Actually, it's not. Borrowing money is the sole responsibility of the borrower, who decides how much money he wants to borrow based on the impact it will have on their finances.
For a loan to materialize, the borrower needs to be aware of how much it will cost him and for how long he will have to repay or service the loan.
That's all the borrower's responsibility.
Only after the borrower is aware of the immediate and long-term impact of his actions will the borrower petition a lender to execute the loan. The lender's only role in the deal is to double-check the borrower's assumptions to ensure the borrower is actually capable of keeping his word and pay back the money he is borrowing.
It's also extremely disingenuous to criticise higher interest rates as they are a safety mechanism that reflects the borrower's ability to repay future loans, and are supposed to act as pressure to dissuade the borrower from digging himself into a finantial hole.
> You shouldn’t just blame on party of the two party interaction.
That's simply wrong on so maby levels. The only part who holds any form of responsibility is the borrower. He's the one making the decision to ask for more loans being fully aware of his financial situation and the impact the new loans have on his cash flow. He is the only part of the arrangement who actively petitions for the deal and has full and complete access to his economic state. The borrower is the only part who has the legal power to sign on the loands. The borrower is the only part who actively seeks the loans and actively engages with each and every single lender in the world to fulfill his desires for more debt.
There are lots of cases where borrowers do not understand all the terms of the loan. Have you read and understood every single loan document you’ve signed? I doubt it. Your belief that only the borrower actively seeks loans is can easily be dispelled by watching TV and seeing ads for loans.
It’s hard to understand how you can write
Borrowing money is the sole responsibility of the borrower...
And the write
The lender’s only role in the deal is to double-check the borrower’s assumptions to ensure the borrower is actually capable of keeping his word and pay back the money he is borrowing.
Lenders can deny loans and they can also reflect the risk in the interest rate. However, lenders only provide their input after the borrower evaluates the impact of a loan on their finances and decides based on his evaluation that he clearly and unambiguiusly is willing and capable of servicing and repaying such a loan in full. Only after that decision is expressly made by the borrower can lenders be involved, and their involvement is restricted to rubberstamp the deal decided by the borrower.
Love these capitalism excuses.
Give money away, no questions asked, blame the borrower.
I mean we can blame the Germans, but it's not going to change anything. Borrowers will find someone to lend to them. It's only the borrower who can avoid getting under crushing debt.
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!