Portugal, Europe and the Euro

In your opinion, does the Euro have a future?

Miguel Portas: What one can say with some assurance is that the Euro is under attack, because speculation is a good business. And it’ll continue like this through 2012 and 2013. The attack is being waged against sovereign debt in the weakest countries. Remember, banks started to bet heavily on the sovereign debts of Greece, Portugal and Ireland – and their interest rates began rising rapidly. They were convinced – and not without reason – that Europe would always underwrite them and that they’d be the only ones never to lose out. They were convinced no country would fail to pay back their debt . Today, we know that’s not the case. There’s already a restructuring plan for Greece’s debt that will mean banks lose around 20% (and that’s far from being enough!). It’s my opinion that this problem will also play out in Portugal.

You think Portugal will have to restructure its debt?

Certainly. The IMF and Troika’s own economic forecasts provide for this. The forecasts envisage huge drops in levels of consumption and investment – both public and private – over the next three to four years. All possibilities for economic growth are entirely dependent on exports – and even if these managed to compensate for the structural decline that has put the country into recession, it’s impossible for Portugal to grow at a rate that could see it making its interest payments and loan instalments. One of the IMF’s possible scenarios admits that the Portuguese economy may only begin to pick up in 2030... That’s 18 years away! Therefore, restructuring of the debt is inevitable! The only question is when and how? Will it be because our creditors demand it, or because we ask for it?

Former prime minister José Socrates has said that the debt isn’t to be paid, but to be managed…

The debt is obviously to be managed! The State also has a contract with its citizens. When it said that there wouldn’t be cuts in pensions, or an increase in taxes, it established a contract with its citizens, did it not? So why should a contract with a creditor be more important – more of a priority – than a contract with a citizen? We have to look at the balance of all the obligations, from an ethical point of view as well as looking at economic interests. Of course we have to pay the debt, but we have to work out how this can be done – without hocking the country’s growth!

Many people feel that we’re living with an artificial currency – one that is out of sync with the Portuguese reality. How much longer do you think we can go on like this?

We could talk about whether Portugal went into the Euro well or badly… In my opinion, with my zeal for being a good student, I would say that Portugal went into the Euro with its own currency, the Escudo, overvalued. In other words, it went into it all wrong. It wanted to have more clout with the Euro – whereas the Germans, even though the Euro was simply a continuation of the Mark in another form, went into it as weak as possible. At the same time, there’s no currency in the history of Economics or Humanity that wasn’t supported by a state. The Euro’s problem is that it doesn’t have strong institutions behind it that can help out with initial difficulties.

And the worst of it is that there’s now a break from the promise that was made to the Portuguese – that we would recover from our position of being “backwards”, and in spite of everything, reach lifestyle levels on a par with the European average. What has actually happened is that Europe has transformed once more into a land of divergence, where the rich have a lot more than the poor and those on the margin – and so the promise of a lifestyle on a par with European levels has ended. Just as has the way of dealing with the Euro crisis! It’s a serious problem for Portugal and all southern countries.

Why?

It’s like we’ve been kidnapped by the Euro... You see, we can’t leave it because of all the inherent risks.

So, we have to live with this?

No, we don’t. What we have to do is change our politics – and the first step is to stop saying that we don’t want anything to do with the Greeks; that we’re “good students” and that they’re the bad ones. We have to be able to unite all the countries in difficulties so that we can force very serious discussion about the absolute necessity for changing Europe’s monetary policies. If we don’t do this, we’ll be stuck – and it won’t just be us. It’ll be most of the European countries – stuck in a number of ways.

The second problem is that the Euro is much too high in relation to the dollar. This is very useful for the banks who can buy more dollar reserves for less Euros – and it’s not complicated for the German industry, either, as they produce high quality products that don’t have a lot of competition on world markets. But for countries that produce textiles and sell tourism – like Portugal – we can only really compete with low prices, so a strong Euro doesn’t help us at all. It’s a catastrophe! We need to redirect the whole economic model of the country!

Are you aware that there are more and more people in difficulties these days?

What’s on the table today and being decided everyday by the government under the auspices of the Troika is a generalised programme of impoverishment of the people. The idea – according to what’s called “creative destruction” in economic terms – is to bring everything down that doesn’t work. It’s the principle that impoverishment is virtuous. The whole strategy of taking a country into recession is a political option. It’s not an inevitable consequence of anything.

Does this stategy work in other countries?

No. In my opinion, it always works badly - with unacceptable social consequences. Intolerable.

Are we far from the worst?

Yes. The worst will happen in 2016/ 2017 because that’s when the large part of the debt has to be paid. We have payments staggered over the next 40 years – but the majority come up in quite a relatively short space of time.

You know that many Algarvians have a lot of problems due to the tolls on the A22. Do you have any message to give them?

Fight them. Keep fighting. I could understand the need to pay tolls if there were good alternatives, but right now, the EN125 is not an option. It’s a bogus alternative, and thus the price structure is a farse - along with the entire logic for the tolls.