A very misleading article, especially the title
Portugal: a European path out of austerity?
The economy has rebounded since the centre-left government reversed post-crisis budget cuts
By Peter Wise and Ben Hall in Lisbon APRIL 10, 2019
This is what I wrote in comment box of the article:
The title of this article is deeply misleading. It sounds like propaganda. One would expect the FT to do more profound research not to mislead readers.
The economy has not rebounded since the centre-left government took office (it started rebound much earlier as teh graph shows) and the budget cuts were not reversed. In fact the austerity has been pursued by other means, less transparent to the public.
In truth most of the merits of the recovery Portugal is experiencing should be credited to the previous government and the troika austerity programme when some (rather few) structural reforms were made.
Also, interest rates on public debt fell dramatically in the same period, and actually increased in the first two years of the new government until they stabilised around the same level of 2%. Despite more favourable conditions from the ECB’s monetary policy than ever before.
If the columnist had done some research he would have found that the only structural improvements in public finances were executed by the previous government, not the one of Mr. Costa.
So quite apart from of having found a “new path” Portugal is simply reaping the fruits of the previous austerity / reforms programme.
Some data.
Official figures from the Bank of Portugal and Eurostat’s Portuguese branch INE show the following evolution of the official primary structural balance / deficit in % GDP:
– In the period 2011-2015 (previous government/ troika) this balance improved 9.2%.
– In 2016-2018 (this government) it improved only 0.1%.
It is clear when the public finances improved in a structural way.
Besides surfing the wave created by the previous austerity, this government is actually missing the opportunity to improve the economic fundamentals of the country. This is clear from the decrease in real labour productivity per person: evolution 2011-2015 +1.9%; evolution 2016-2018 negative -0.4% (official Eurostat data).
https://www.ft.com/content/66fccb1a-515c-11e9-b401-8d9ef1626294