Progressive Economy newsletter - N°5 - 2017

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Newsletter - 05 - 2017 - Progressive Economy
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Newsletter N°5 - 2017
Portugal

Growth through investments - Four lessons to learn from Portugal

At this week’s Eurogroup meeting, the European Commission (EC), the European Central Bank (ECB), the European Stability Mechanism (ESM) and the International Monetary Fund (IMF) informed about the results of the sixth post-programme surveillance mission to Portugal. Portugal is a solid proof of an intelligent investment policy. The Socialist Party government in Portugal has been able to turn the page on austerity and recreate growth. Progressive Economy here gives you a four steps guide to the successful example of Portugal.

1. Austerity isn’t working

1. Austerity isn’t working

The former right-wing government’s (2011-2015) austerity policies was a social disaster: cuts in public servants salaries, current pensions and social benefits; divestment in social services; tax rises over private consumption and incomes; deregulation of labour market laws; privatization of some of the most important public enterprises (the national electricity company, postal mail service and national airline company, etc.). However, the austerity policy did not at all solve Portuguese imbalances and inequalities. In 2015, the deficit was still 4,4% of GDP, in spite of all the cuts in public expenditure and all the measures implemented to increase revenues during those years. Furthermore the unemployment rate was 11,9% in 2010 and went up to 12,5% in 2015.

2. Turn the page on austerity - there is an alternative

2. Turn the page on austerity - there is an alternative

The right-wing government was incapable of achieving the 3% deficit goal or any other of the initial targets set by the EC, ECB and IMF. In 2015, the deficit was still 4,4% of GDP, in spite of all the cuts in public expenditure and all the measures implemented to increase revenues during those years. Consequently, Portugal is still under an Excessive Deficit Procedure and, because of that, in 2016 it was still at risk of suffering sanctions by the European institutions. Sanctions, which could potentially worsening Portugal’s situation.

However, when the Socialist government came to power in 2015, they pledged both to reverse the austerity measures attached to Portugal’s bail-out during the euro crisis and to meet stiff fiscal targets. And that they did:

  • resetting incomes (that had been cut),
  • re-launching labour and social rights (that had been retrenched),
  • decrease taxes that hit particularly the middle class and the poor (that had been risen), stimulating private economic initiative through the execution of European funds (that had been stopped)
  • reversing the (unfinished) privatizations of public transport companies,
  • keeping the European commitment.

3. There is an alternative... and it works

3. There is an alternative... and it works

In 2016, the Socialist government cut the budget deficit by more than half to just under 2.1% of GDP, the lowest since Portugal’s transition to democracy in 1974. It is the first time that Portugal has complied with the euro zone’s fiscal rules. The economy has grown for 13 quarters, expanding at an annualised rate of 2% in the fourth quarter of last year. Figures released in June 2017 showed Portugal’s growth accelerating twice as quickly as the eurozone average in the first quarter, while the yield on 10-year government debt dropped to the lowest level in 10 months.

Portugal’s unemployment rate tumbled to the lowest since 2009 in the second quarter of 2017, pushing it below the eurozone’s average for the first time since the continent’s sovereign debt crisis. The unemployment rate is now lower than the average unemployment in the single currency bloc, which is down to 9.2%. In other words, the investment policy has been a huge success at every level.

4. Rewrite the rules of the Fiscal Compact

4. Rewrite the rules of the Fiscal Compact

The case of Portugal sets an example for the rest of the Eurozone countries. Austerity is dysfunctional, while investment policy can recreate growth and bring down the unemployment rate and deficit. However, even though Portugal managed to follow the European rules for public finances, these rules set a barrier for investments. Therefore, there is a need to rewrite the rules in the Fiscal Compact to allow investment policy and ensure that the EU and its member states can take action and follow anti-cyclical policies to combat recession.

Conference (18-19 Oct 2017): Building the Progressive Future Together

Conference (18-19 Oct 2017): Building the Progressive Future Together

This week progressive leaders and forces will gather in Brussels for a prominent two-day event on 18 and 19 October 2017 on Building the Progressive Future Together. The event forms part of the Together initiative and will take place at The Square in Brussels. It will host the PES leaders pre-summit meeting in parallel, with various progressive prime ministers and party leaders joining.

Speakers include:

  • Gianni Pittella S&D Group president,
  • Sergei Stanishev PES president,
  • Jeremy Corbyn, UK Labour leader,
  • Pedro Sánchez, secretary general of PSOE (Spain),
  • Paul Magnette, mayor of Charleroi (Belgium),
  • Federica Mogherini EU high representative for foreign affairs,
  • Frans Timmermans Commissioner,
  • British journalist, broadcaster and author Paul Mason,
  • Professor of social sciences at Humboldt-University Berlin, Dr Naika Foroutan,
  • Professor of Economics and Public Policy at Oxford University Sir Paul Collier

And many other stakeholders and youth representatives.

Successful social democratic alternatives - new article by professor Heikki Patomäki

Successful social democratic alternatives - new article by professor Heikki Patomäki

“The left, trapped in a limited territorial state, is likely to fail even if it wins national elections, unless it succeeds in globalising democratic politics. Patomäki calls also for breaking “the gap between routine production and established privileges, on the one hand, and emerging areas and forms of the economy, on the other.

Heikki Patomäki is a Political Economist at the University of Helsinki and member of Progressive Economy’s Scientific Board.

Group of the Progressive Alliance of Socialists & Democrats in the European Parliament
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