Portugal asked for a bailout in 2011, one year after Greece, and from the beginning, it was treated as “the good student.” “Portugal is not Greece” was repeated over and over again. And it’s true. From the end of 2014 the European Central Bank, through the Bank of Portugal, was allowed to buy Portuguese public debt bonds directly, in a form of quantitative easing. This had two positive outcomes: it lowered the interest rates on the debt, and a part of the interest rates paid by the Portuguese government could thus be paid to the Bank of Portugal, therefore re-injecting money into the Portuguese economy. The European institutions never allowed the Syriza-led government in Greece to resort to such quantitative easing. [...]
The agreement allowed the left-wing parties to vote against some of the government’s measures, since they are not subject to the same discipline as in a real coalition. They insisted that this was not their government and that it wouldn’t solve the country’s fundamental problems, at the same time as they tried to answer the popular hopes of an end to the most damaging austerity measures. [...]
This is no miracle: it is the combination of internal factors (small income growth, a shift of the narrative around austerity and, therefore, in consumption patterns) and most importantly, external political factors. Not only do part of the European institutions support this government, but the country has also benefited from the political crisis in the Middle East, in the sense that it has driven a fall in the price of oil (an important factor for an import-based economy) and pushed tourism away from this region in favor of destinations like Portugal.
If we look closely, we can see other problems with this government. The troika labor laws were left untouched, collective bargaining has almost vanished, and precarity is on the rise. A study by the Observatório das Desigualdades places the real unemployment rate at 17.5 percent — much less than the 28 percent in 2013 but far above the official government numbers (8.5 percent). Almost all the new jobs that have been created are precarious. Public services are crumbling: both health and education are heavily underfunded and on the verge of collapse. The Portuguese banking system is a ticking time bomb, with more banks bailed out with public money but not under public control, leaving it more vulnerable to shifts at the European center than in 2008. The central question of the debt has in fact disappeared from public debate.
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