The country that shied away from higher taxes also shied away from cuts in public spending when it grasped that this would amount to lower salaries and pensions. This is the right way to go, though, and it always has been. But it is just the journey, not the destination. Heading down this road will probably mean closing hospitals, cutting subsidies, firing teachers, and shutting down public companies. Part of this road should already have been travelled a long time ago. Two years after the request for outside intervention, families and companies have adapted – but not the state.

There will be demands to bring greater flexibility to the deficit and to renegotiate the public debt. The austerity that has been announced will increase poverty through social cuts and unemployment by boosting the numbers of public officials who lose their jobs. And so, once more, the new austerity does not replace the previous austerity; it piles it on. Cutting state spending solves only a part of the problem – namely, the building of a better state – a political system free of corruption and with stronger institutions, ensuring a society with goals that can be believed in.

* Read more here.

The post Portugal must learn to love austerity appeared first on The Corner.

We all have been here before, but that doesn’t mean governments of the southern eurozone countries shouldn’t still keep an eye on sovereign bond yields. Right now, it is bad news for Italy, whose 10-year debt paper has seen investor distrust increase after the results of the national elections were known. Interest rates have gone up by almost 30 basis points, while for most of Italy’s neighbours the opposite is so far true–some 40 bp in the case of Spain.

Contagion has been bucked, then, in spite of the instability markets forecast over Italian politics and the severe difficulties ahead to form a cabinet with enough support to carry out the reform agenda.

Analysts in Madrid also blame the volume of Italian debt on sale this week, up to €15 billion. Spain and Ireland offered smaller figures, with better reception: Ireland, which had not approached markets since late in 2010, sold €5 billion with a demand of €12 billion, according to Afi Spain.

Portugal, by the way, has joined Ireland, too, in auctioning bonds with maturities of more than two years, which has triggered rumours about the possibility that the European Central Bank could purchase short-term debt from both countries to provide more liquidity into their economies. In Rome, they must be thinking that it would be a good idea to show investors that the euro has a central bank willing to act, and not just talk the talk.

The post Thursday’s chart: Quo Vadis, Italian yield? appeared first on The Corner.

We live in a time of peaceful revolt that still fits inside the political system, as we know it today. But that system has entered its decadent phase. If the political world persists in not responding to the mood of the country, unpredictable events will take place. I believe (or at least I hope) that they will take place within the spirit of democracy and without imperilling it. After two years of austerity and misery, however, everything can change. In the social protests, much has already changed. It is not only merely a corporatist embodiment of union and partisan structures, and it is no longer even dominated by them. Whether this is good or bad I do not know. It’s just how it is.

If the opposition fails to embody a credible alternative, and if the main party of the Portuguese right starts to fall apart, then the first to seize this moment, whether they are serious players or populists, comedians or statesmen, may provoke a political earthquake. Because the social earthquake is already here. Without, apparently, stirring the institutions and parties to react.

* Read more here.

The post Portugal shouted ‘enough’! appeared first on The Corner.

Like other Portuguese assets, plunged into recession and falling victim to savage budget cuts, the naval shipyards of Viana do Castelo have been put up for sale. Since 2012, Norwegian, Brazilian and Chinese parties have tried to take over the country’s leading shipyard. But negotiations with EMPORDEF, the state agency that owns the shipyard, have dragged on.

For the 80,000 or so inhabitants of Viana, like for the rest of the country, the powerful wave of privatisation is causing a lot of worry. “Some of these state enterprises are gems, others are junk buckets, but they’re all strategic assets. And we’re losing them forever,” worries Bernardo S Barbosa, head of the local weekly Aurora do Lima. The Socialist mayor, José Maria Costa, shares a growing national concern: the feeling that the country is losing its sovereignty. In a vast room at City Hall, this engineer by training reacts very angrily to the policy of the executive: “By taking away our public assets, which are so vital, to the benefit of foreign companies, and private interests at that, we’re losing control of our own destiny. I even fear that in the end it will affect our freedom and democracy.”

* Read more here.

The post Portugal attests austerity alone cannot reign in debt crisis appeared first on The Corner.

The country has received financial support from EU bailout funds, the European Central Bank and the IMF since the spring of 2011. However, hardly any progress has been made with the reforms that Portugal was supposed to implement in exchange for this assistance. The population has rebelled against prescribed austerity policies and the privatisation programme has been very slow to get under way.

This was the context for the idea of seeking help abroad. Foreign Minister Paulo Portas spent months trying to convince Portugal’s European partners — a difficult task because a Portuguese residency permit is also valid in other EU countries. In principle, the investors that Portugal intended to attract could also set up in Paris, Berlin or Madrid.

It was for this reason that major restrictions were established. Investors are required to inject at least €1m into a Portuguese company, create a minimum of 30 jobs in the country, or to acquire a property worth €500,000. Once one of these conditions has been fulfilled, they are issued with an “initial” visa that is valid for two years.

This can subsequently be converted into a permanent residency permit, or even a Portuguese passport, if the investors are willing to keep their capital in the country for a period of more than five years.

*Keep reading here.

The post How Portugal charms investors appeared first on The Corner.