The economist and university professor João César das Neves accuses the government of living at the expense of a favorable external environment and not to enjoy the good time to implement structural reforms. About a month and half of the presentation of the state budget for 2019 warn César das Neves for the dangers of a budget in the election year.
Do you understand the message of Mario Centeno & # 39; s video about leaving Greece?
It is the position of the Eurogroup, he is not his, personally, he is not from the Portuguese government. It can not be interpreted in any other way.
But is it logical, in your opinion, that this message celebrates a clean exit from Greece?
The Eurogroup can not say that things have gone wrong or draw attention to the sacrifices, because when that happens, it raises an enormous amount of other problems that the President of the Eurogroup of course does not want or can not raise. You have to say something political, and what is extraordinary is that people start to treat it as if it were a commentator and as if that were his opinion. That seems a bit foolish to me. It is a polemic that is completely on the side of reality. Of course, the President of the Eurogroup and the Portuguese Minister of Finance can not say things that I say for example.
Making the bridge to Portugal. We left the adjustment program four years ago and a few weeks ago the New York Times gave Portugal an example of how it managed to be anti-terror. Can we actually carry out this evaluation?
No. Thats crazy. First, the austerity problem was set in 2011. The situation can not be revised in 2015 or 2014 or 2018. In 2011, there was no alternative to austerity measures. Everyone said that every international organization, every analyst, every scholar said there was no alternative to austerity. Three years later, when the program was over, the economy began to recover and of course it was no longer logical to use austerity at that moment. People say that this situation now proves that austerity policy at that time was a mistake, a complete foolishness. And they know it's stupid. What has happened is that the politicians who are now in power have been against the austerity during the time they were in the opposition, because they are fighting in opposition. And make use of the possibility, because the government was doing austerity – which is a very unpleasant thing – and therefore it was easy to beat. And now, who are in power, they can not say that what they were doing at the time was political expediency.
But are we, as a part of the European economy, not dependent on monetary policy measures of the European Central Bank and other external factors?
The ECB did what it had to do, a little late. Or rather, central banks did what they should have done after the 2008 crisis. The ECB was one of those who were too late, and that is why Europe also had a hard time. But what is extraordinary is that they were the only ones who did what they should have done. Central banks do not solve problems, control liquidity, control money and inject money, alleviate pain, alleviate the crisis, but they do not. The structural problems are there and they continue here. It is a general problem. We do not solve the problems. We quickly treated with an anesthetic that worked and drastically reduced suffering. Now anesthesia is used to perform the surgical procedure, and this has not been done.
Are we still numb?
The entire global economy is still injecting liquidity, the only exception being the US economy, but with great fear. The European economy continues to pour a huge amount of liquidity every month, just like the Japanese economy, the British economy, etc. The Western economies are still under narcosis and can not handle it after seven or eight years of crisis. We still can not get rid of this anesthesia and that is scary.
About a year ago he said that the euphoria that lived in the country was not "true" …
It is true that the economy is growing, and that is good. We are fortunately not so foolishly announced, but we have a very serious problem of capital, labor and productivity, the three most important elements of production that are not being dealt with. The problems are to restore the incomes, to meet the demands of teachers, or doctors, or whatever … Policy is played that is minimally satisfied because the economy is growing, pulled by Europe and the world, but once the wind reverses … And notice, we are with an extension that has been in Portugal for five years … How much longer will it take? We do not know, but it does not last forever and there are a number of threatening signs on the horizon: from Trump's policy to other financial imbalances and in different parts of the world. One thing that is punctual – and that is perfectly normal – is having a huge impact on the Portuguese economy, and at that time it will be very difficult for people to say "let's go back to the austerity". But we will have to return to the cuts, because in fact the structural reforms have not been implemented, the situation has not changed and that is what frightens us. For what is the reaction of the country – to whom they were convinced that after all it was not necessary to have austerity, who were convinced that everything was right and that the economy is a miracle – to discover that the economy is nothing is to wonder about. It is this humiliation of the confidence in the political forces that frighten me and that already in the US and Europe generates an increase of extremism and a turbulence that is frightening.
What could be the trigger for a new crisis situation in Portugal?
The Portuguese economy is attracted a lot by exports and private consumption, they are not sustainable things. Exports are by nature very volatile and unstable and we have a significant share in our economy, especially industry and tourism, but also in the trade that supports the economy. These three sectors can have serious problems once there is an international problem. Many things can pose an international problem: an oil shock, a commercial fight problem, a scare attack. I will not even try to predict the trigger, because the most important thing is not even the trigger. The problem is not in the trigger. The problem is that we have everything full of gunpowder, that is, as soon as there is a small explosion, this breaks out. And so we could have done something. We have no control over international situations nor about the opportunities that the global economy can have. What we can check is the vulnerability of the Portuguese economy to this type of shocks. And we have done almost nothing. We continue with a huge lack of capital, the economy succeeds in increasing its consumption because it consumes capital, but the big trick has been to sell capital – houses, businesses and land abroad. We have a period of good growth, but that is completely artificial. Even the great financial success of this government, being the state budget and the deficit, is artificial. Because the deficit has been reduced to a level that we have never had in our democracy, but there has been no structural reform …
What reforms are these?
If you want the list of structural reforms that have to be made, they are all in the Troika's document. We have to reduce our employees, we have to reduce the service. We must build a state that we can afford, that we can live with it and that we do not have. What happens is captives, cuts in operating costs, reductions in investments. Because there were wage increases, the workers did not protest; as far left the government supports, the workers do not protest. For the first time we could have serious prisoners without the services being protested for these two reasons. The great success in reducing the deficit is the increase in turnover, the growth of the economy. The costs even increased, did not decrease. Success is indisputable and no one can value financial policy because it is a reality, but even that has elements that are very debatable.
We are about a month and a half after the presentation of the state budget and we are at the end of the legislature. What kind of budget can we expect?
In political terms it will not be a dangerous budget because nobody wants more elections, except the PS, but that can not have elections, so everyone will approve the budget because they want elections as late as possible. It is, of course, more dangerous in the financial sense of the word. It is the election budget, there are two elections, and of course all the efforts that were unexpected and contrary to what was being said – the government said it would start to spend, but it did not, on the contrary, the minister Mario Centeno started considerably cutting and increased taxes to reduce the deficit. But we will be in the election year and it will be interesting to see who it really is [no governo]because so far the Prime Minister has supported Minister Centeno, who is a star of the government for the financial successes, but now it is elections. It will be very interesting to see what will happen. It will be political in the technical sense of the word: how can one not spoil the painting of these three years of deficit reduction and at the same time attend the election year?
Are you afraid that this play has lapsed?
Everything will not be. There is no need to ruin everything and there is still some room for maneuver to be unable to violate the agreements with Europe and to implement the change, even because Europe thinks it is an election year. That does not bother me. The most worrying thing is that this is all extremely fragile. Incidentally, the Public Finance Council and UTAO have said this repeatedly in parliament. Everything was achieved without actually having solved the problem. It is as if you put on a belt without diets, the fat is everywhere, but tighter. It looks elegant, but it is not, because it is going to burst. And when all of these outbursts will see how illusory this period was, but this growth is mediocre: we have a rate of less than 2.5%. No other Portuguese recovery in recent decades has been so low. We do not have a new development spurt that will lead the country to reach partners in Europe. We have a period of relief, but with the same vices that led us to the previous crisis and that will certainly generate the following, because I do not know if the electorate will take another. Since the beginning of the millennium, we have said that the problem has been solved, and we have already had the crisis of José Barroso, the crisis of José Sócrates and we will have the third, I do not know who the holder will be, but we have already had three, third. The country can no longer stand it. This is what can lead to situations such as we have lived for a hundred or 120 years. The collapse of the First Republic was built for decades by the monarchy, who promised that everything would be solved and nothing would be solved. And to say that Portugal is a land of soft habits is nonsense. I fear – the world is very different and things have evolved – that we have a loss of confidence in our political class, with good reasons, as we encounter in Italy, Brazil or other countries.
Return to the state budget. We already have some measures at the negotiating table: reducing VAT on electricity, raising pensions, easing the IRS. Is there room for maneuvers for all of this? Because there is no free lunch …
Minister Mário Centeno has succeeded several times in bringing these magical tours mainly at the expense of the quality of service. His great trick is services that do not work: justice is screaming, health is not working. We have protests everywhere about the quality of services. But there are various other signs everywhere, and this was the basic trick. And with that he has managed the & # 39; brilliants & # 39; to increase wages successively, increase pensions and reduce taxes. There is no news here, but this time it is an election year.