How many are there?

The mystery might finally be solved.  How many public employees are there in Portugal?  Nobody knows.

The guess is around 700.000.  It could be less but probably more.  How many companies in the world do not know how many employees they have?  If they are private - I think the number is very low.

I do wonder though.  Who makes sure everybody gets a salary and pension?  Could anybody claim until now they are a public employee?  Can it be claimed more than once?  If you are unemployed - give it a go.

Ah yes, how will the mystery be solved?  By force.  If public entities by the 15th of January have not declared how many employees they have - they may be penalized by having their budget cut down.  Hat tip: Diário de Noticías.

They may...  And what would keep them from lying?

I suggest the following instead.  A central register of every employee in the country.  Give public employees one month to sign up.  Otherwise no salary - no pension.  And one central function for paying aforesaid salaries and pensions.  In principle we would learn the real number of public employees and the expenses associated.

Perhaps this way people with money would not demand 15% interest for lending money to Portugal by buying government bonds.  Perhaps they would conclude that a country that keeps track of small things like numbers of public servants and public expenditure could be taken seriously?

Purpose of humanity

My nephew, who is a very smart boy, asked me if I knew what the purpose of humans is.  I am somewhat in doubt, but my nephew answered his own question: "Reproduction", before I could come with an inappropriate answer like: Self destruction

Biologically speaking, reproduction, is of course the right answer.  However to reproduce we also need to feed.

Interestingly, procreation in Portugal is supposedly among the lowest in the world and a lot of people will have trouble with the feeding this year in Portugal.

The above numbers are from 2009.  I will guarantee you they are even lower now in Portugal.

Rescind membership of the UN

Portugal and a lot of other countries could save money leaving the wasteful organization called the United Nations.  United as in saluting dictators like Stalin, Hitler and Kim Jong-Il.

Personally, I would rather not be united with countries like North Korea.  Perhaps 10% of the population has been killed in concentration camps.  If you happen to be seen as critical of anything in North Korea:  You, your wife, your parents and your children are sent to concentration camps.  The population as a whole is starving.  In the concentration camp you starve to death.  It is cheaper than gassing, I suppose.
No wonder the North Koreans have learned to cry on demand.

And yet this is the reaction of the UN to the death of a monster:

UN offices worldwide lowered their flag to half-mast as North Korea began a 2-day funeral for dictator Kim Jong-il. Above: UN European headquarters in Geneva, seat of the UN Human Rights Council, Dec. 28, 2011. (Photo: UN Watch)
Hat tip: UNWatch

I find it distasteful.  It is nauseating political correctness, and the symptom of a wasteful unnecessary bureaucracy.

Last Friday Rant of 2011

I have been busy and on holidays - the blog has been neglected.

There are a few news worth reporting on.  Some are even good.  The speculation against the Euro and the countries in trouble in Europe seems to be lessening.  But perhaps it is because of the holidays and this is just the quiet before the storm.

Italy managed to sell bonds at a low interest rate compared to the 7+ percent of previous offerings.  Portugal and Spain still has high interest rates.

The mortgage interest is going down, which signifies lower payments on housing, which will help the people a little bit.  On the other hand hardly any houses are sold.

In Spain the news are not good.  The public deficit will not be 6% this year but a staggering 8%.  The cure, which is worse than the decease is more taxes as proposed by the government.  Let us not forget that unemployment in Spain is nearly double of Portugal.  In spite of a seemingly stronger economy, Spain is at risk.

The government in Portugal talks about structural reform.  We do not see much of that.  In fact nothing so far... Except for the fact that EDP (the electricity) company has been sold.  A Chinese company has bought the shares owned by the state (21.35%).  I wonder if the government now will have to find another way charging hidden taxes of which the electricity bill already contains 50%.  Also I am quite sure the Portuguese people has not gotten full value for this former common good.  That is how it goes in a public sale, not to mention a public fire sale.  I am quite sure that electricity will not get cheaper now - on the contrary.

Selling the country to the Chinese is not exactly my favorite solution to the problems.  On the other hand it is a viable one, there is not much choice, and better to be working for the Chinese than to starve...

Finally, it seems we will have a solution to the absurd rental law.  A large number of rental contracts have rents that are so low they approach zero.  This because rents have not been following the market price - in fact they were not allowed to.  It has been the policy of all previous governments to let property owners pay for rent subsidization.  This is obviously a government task and it has let to far to few homes for rent in Portugal.  Even wealthy people have abused this condition.  I have heard of people living in palaces paying 50 Euros a month.  The problem is the large number of poor people needing the low rent to get by.  They will now in five years probably have to live on the streets as the rents within five years supposedly will be actualized.  The proposed law is not quite clear at this point - in particular with regard to rent subsidization, which will be necessary.  I am in favor anyway, as a free market is better at regulating prices than any government, and a large number of people have no homes available for rent as the situation stands.  Building new and maintaining existing homes for rent, would be a nice help for the economy as well.  It could also clear up some of the ruins you see in each city in Portugal.

While talking rent - I nearly forgot.   One of the reasons the government is promoting higher rents is of course because of taxation.  Could it be the main one?  I would not be surprised as taxing has so far been the only remedy for the crisis applied by the government.

The number of children born in Portugal is the lowest since 1960, when the numbers started being registered centrally (by INI - National Institute of Statistics).  Apparently because of the crisis.  I will buy that as one explanation.  Another is the fact that the young are emigrating.  A requisite of child birth is a relatively young mother...   On the other hand perhaps the government is planning on grandmothers giving birth again using artificial means?  Perhaps there is plan behind the madness?

On Sunday going to the café will start becoming more expensive.  A number of intermediate VAT rates levied on diverse products will go up to 23%.  I can guarantee longer walks as a number of establishments will close.  Once you get to enjoy your coffee, it will only be until you see the bill.  Not only restaurants and cafés will become more expensive.  A number of products will see VAT raised from 6% and 13% to 23%.  Joy - more money for the state to pay back loans - whatever is left is for waste.  It goes into the black hole.  It will be interesting whether raising the VAT will actually give more income?  If the amount of business lost and the number of businesses actually closing down is large - then it will not - as I suspect.  But I do guarantee this:  The people will become more poor.

A young person going to cafés a lot asked me concerning the VAT:  For how long will it be more expensive because of the Value Added Tax?   My answer was easy:  Forever.  To my knowledge no VAT has ever been lowered.  A problem shared with most taxes.  The government assurances that the austerity measures are temporary are laughable.

In Portugal the police force called ASAE controls smoking and restaurants using Gestapo methods.  They are responsible for implementing all kind of regulations limiting the freedom of activities performed on private property.  I am talking about hotels, restaurants, shops and so on.  Don't let your customers dance in your restaurant as that will land you in front of judge.   And woe if you do not remember to put up the sign indicating that the sale of tobacco to minors is illegal.  The minimum fine is 30.000 euros and it can go up to 250.000.  Interestingly the fine for actually selling tobacco to minors is the same and in reality much lower.
Praised be bureaucracies.
Most of all the small gyms in Portugal have been closed down or will be soon.  They do not have sufficient ventilation, lockers, showers, toilets, separate toilet facilities for staff, or the money for several technical directors with a university degree in fitness (there must always be one on the premises).  The laws were made in a collaboration between the universities and the big (mostly multinational) gyms.  Thus the poor will now stop using gymnasiums as the cheap ones are dying out.
Praised be bureaucracies.

Who saves who?

A Chinese company will buy EDP (the electricity company) - at least 20% of it.  They won the tender.  Portugal is going to sell a number of public companies in the near future.

This is funny. I got it from the blog "Cachimbo de Magritte" (Hat tip!):

• In 1949 - a majority of intellectuals believed that communism would save China
• In 1969 - the same intellectuals believed that China (with its cultural revolution) would save communism
• In 1979 - Deng Xiao Ping understood that only capitalism could save China.
• In 2009 - the whole world believed that only China could save capitalism
• In 2011 – Portugal understood that only Chinese capitalism could save it

The mother of all tooth aches

Our dear prime minister has admitted that public deficit next year will be 5.2% of GDP.  In itself a staggering value of ~8.5 billion Euros.  Roughly 10.5% of the state budget.

I have even been generous here using the official EU numbers for the expected retraction of the economy next year of 3.4%.  The real retraction will be larger.

Our goal for the deficit next year is 4.5%.  This year it is 5.9%.  According to the minister of finance we will reach only 4% this year by magic by the creative accounting of throwing the banker's pension fund into the black hole of public finance.

The  pension fund was 6 billion euros i.e. ~3.5% of the GDP.  How that adds up to 8%, I cannot understand.  8% is was what the prime minister also admitted the deficit would have been this year with out the theft gift - and 3.5% plus 4% is only 7.5%...

To put everything a bit more into perspective.

• The real deficit of this year compared to last year are not far from each other.  Last year was 9% and bit
• The real deficit with a large number of austerity measures has thus only been lowered about 1%
• The 6 billion euros bankers fund was around 7% of state "income" this year
• The next 10 years (I believe it is many more), the state will have to find 0.6 billion euros to pay the banker's pension.  As the fund is in the black hole...  
• BTW this is pointed to as one of the reasons the 2012 budget is already invalidated.
• We are not even in 2012 yet!
• If you looked at the pension fund as loan - as would be proper, then the interest rate is 10%.  And perhaps much more.

Of course added to that an untold number of debts will have to paid every year.  The Troika loan, the other state loans, the public companies continuing debt spiral and so on.  Just the interest rate that will have be paid every year is incredibly large.  The interests of the Troika loan alone will require 10% of the entire state budget.

Furthermore what about the problems of a systemic world wide crisis, an even worse crisis in the EU, a retracting Portuguese economy (and it may get real ugly), PPPs, a broke social security (the money for pensions has been spent) and zero measures to liberate the companies from the state - still no structural reforms?

Portugal is broke.  The country would be better off admitting it now (everybody but the politicians know it).  Portugal should seek help.  Get a hair cut like Greece (currently negotiations have reached 65%) and be happy it not called a default - a state bankruptcy - though I can personally see no difference.

Unless Europe gets it act together it would also be better for Portugal to leave the Euro entirely.  The Portuguese economy is simply not up to it.

It is like a tooth ache.  You can ignore and not go to the dentist but it will only get worse in the end.  The people has suffered sufficiently because of a small group of corrupt criminals.  It is a time for drastic measures.

The money trap

Today, we can read in the newspaper (hat tip: Correio de Manha) that the savings in 2012 on public servant salaries and pensions is 4.26 billion euros.  However the loss in income on taxes and social security means the liquid savings are only nearly half:  2.57 billion euros.

Salaries:
Savings: 3 billion, considering loss of taxes and social security: 1.62 billion

Pensions:
Savings: 1.26 billion, considering loss of taxes and social security: 0.95 billion

The savings are mainly due to cutting the 13th and the 14th salaries.

I doubt all lost taxes are included in the above.  What about VAT?  Or people buying a car?

The problem has been created as taxes taken all together already are extremely high.

The problem of firing existing public employees or retiring existing public employees is similar.  There are no real savings now.  They will instead of working, do nothing (which I assume is less than now).  On top of that the cost of the state in the short to medium term is the same (or more) due to penalties, unemployment benefits and pensions.

When you reduce money available to people they will obviously spend less. Hence, less companies will be created, some existing companies and businesses will fail, some families will go bankrupt etc.  The net income of the state due to these measures may in fact be close to neutral or even negative.  Due to the current state of affairs - with a generalized financial crisis, tight or no credit, the tightening or stop of spending by the public and private sector, zero incentives for companies, zero help to companies, added costs in the form of taxes to both companies and citizens, the maintained and even tightening bureaucratic barriers - this may in fact be the infamous drop, that will start an avalanche of misery.  Both measured in financial and human costs.

The only viable solution is to make the private enterprises more profitable and larger combined with creating more companies.   These companies need to produce and export.  Because we all live off their products.

We are still awaiting structural reforms.  Don't hold your breath.

Scoundrels

Must watch video.  Only three minutes.

Brilliant discourse by Godfrey Bloom.  Finally a gentleman using the right names for the crimes committed.  I could not agree more.

Hat tip to the great blog: Apodrecetuga

Comment on asking teachers to emigrate

I have left this comment on an article on the great blog Blasfemias.net.  The article defends the comments of the  prime minister concerning unemployed teachers should emigrate.


"I beg to differ. The idea of sending away qualified and educated Portuguese abroad, because there is no work here is in essence defeatist. It removes the focus from the important objective of creating conditions for companies to employ and produce more.
Concerning the teachers in particular, it is obvious there are too many now and in the future. But instead of asking them to emigrate they should be requalified for other professions. Already Portugal is one of the countries in Europe with the least educated working force. Also asking the teachers to emigrate will only make sure the smartest and most dynamic leave. They are the ones most needed.
Instead the teachers of no talent or mediocre talent should be fired. In fact, a small percentage should be let go every year. No matter the length of career. 20%-30% less teachers at a higher salary would not hurt Portugal. It might once again make teaching a profession of high status sought out by gifted people. Personally, I cannot think of a more important profession…"

Now, if you are a teacher and can get no job, and really want to teach - then the prime minister is correct.  There be jobs outside Portugal.

Furthermore, the old fashioned idea of a job for life or even the same profession for a life is no longer valid.  People should continuously seek education and requalification as necessary.  If nothing else for the pure pleasure of it.

Open letter to the EU

The Telegraph in the U.K. has published this open letter from 16 university professors:


Without radical deregulation, EU markets will never thrive


"SIR – As economists from 16 EU states, we don’t all hold the same view on whether the euro was a good idea, nor any particular view on David Cameron’s veto of a possible EU treaty. However, we are staunch believers in the free movement of goods, services, people and capital as enshrined in the Treaty of Rome.

Though only one person from each country has signed this letter, our views are not far out of line with those of many fellow economists. The EU should not focus on Mr Cameron’s actions. It should, instead, look at the underlying arguments about the future of the EU and the euro.

Unless there is radical deregulation of the labour and product markets and lower taxation, the euro can never work and the EU can never be a thriving economic area again.

These are the challenges, but the EU and its member governments are moving in the wrong direction. We see no sign that those discussing how to deal with the euro crisis understand the actions that need to be taken.

Whether or not the euro survives, this attitude will lead to gradual decline and increased social conflict within the EU. It may ultimately lead to the disintegration of both the single currency and the EU."


Until the politicians start understanding the root of the problem and commence on essential structural reforms we will see no progress.

Perhaps this crisis is necessary to open the eyes of the incredulous.

If Portugal were a company

An analogy

"If Portugal were a company it would be considered badly managed, broke, unable to get finance, with too many employees, of which many without qualifications, and unable to manage its employees."

Vitor Andrade, Journalist, Expresso on SIC Noticias

We can be happy it is not a company, otherwise it would have to be shutdown.

Joy, we will pay but not receive

Mr. Passos Coelho, our dear prime minister, has told us that in twenty years pensions will be half of what they are today.

He is right, of course.  The social security is broke.  The money has been spent.  People live too long and the thought of a pension equivalent to a full salary is preposterous.  In twenty years not only will the pensions be half - I think even less - also retirement will be ten years or more later.

Meanwhile, we the workers, can enjoy the pleasure of contributing to paying a full salary to the relatively young current retirees.  Already, 80% tax on the money paid by an employer for having an employee is not unheard of.  We can't even blame the majority of current retirees - they had their money stolen by thieves politicians working for their own the common good.

Joy.