Do not believe the official story

Today we note that the recession (the retraction of the economy) in Portugal in 2012 by the European Commission is being estimated to 3%  A short time ago the prevision from the Commission was closer to 2%. We currently see numbers already starting to invalidate the 2.8% estimated by the government.  It will of course put the whole 2012 state budget at risk which started being negotiated in parliament just today.

Only politicians and economists working for official entities such as the Portuguese government, OECD, ECB, the European Commission, the IMF etc. seem to believe these numbers.  The real numbers will be much worse - or I will have to eat my old hat.  The risk of the latter is minimal as anybody with an iota of common sense and an calculator can see where we are heading.

I believe a few responsible leaders in Portugal know the sad truth.  They perhaps keep quiet not to create panic.  Portugal is broke and will need to soon negotiate help - at a minimum a technical default.  In this climate of international crisis there is no easy way out - on the contrary - everything will be more difficult.  There may not be any money available for rescue packages if (when?) countries like Italy and Spain start floundering.   

The  austerity measures, much needed savings in the public sector, initially will add to the retraction of the economy.   Mainly because there are basically zero initiatives to create growth.  On the contrary the already high tax burden on people and companies producing is rising dramatically.  This combined with a huge drop off in internal demand will break half of the shops and companies in Portugal.  This process is already started.

The government seem to at least theoretically to understand the only way out of the crisis is by producing more.  Only producers are paying the bills.  The whole public sector and everybody receiving money or services from the public sector live off producers.   It is simply not possible to live spending more than we produce.

However, the actions taken by the government are so far only short term stop gap measures nearly completely ignoring the needs of the productive and entirely ignoring the need for more and new producers (private enterprise) of which exporters are the most valuable.  Some announced measures are promising, but have so far stayed on paper where the ink is still wet.  See here and here. 

You just need to look at Greece, to see where we are going.  You hear repeated constantly, that Portugal is not Greece or the other PIIGS, but then where is the explanation to why it seems we have the same problems and all work on similar measures?  Portugal is not Greece.  Portugal is Greece 6-12 months ago.

Stupidity has created huge amounts of public debt above 100% of the GDP with a burden of interest that will soon surpass 5% of the GDP and is impossible to pay. Combined with a badly functioning  unproductive public apparatus with bureaucrats living in an alternative reality, intertwined with nepotism, politics and a strong mix of public/private interests there are no easy solutions.

The only solutions available will be draconian such as the prime minister's plan announced today to cut down by 43% the public sector by 2014 - in three years only - it seems implausible.  I would think it impossible without cutting public salaries and all pensions to half.  On top of that half of the public servants may have to be fired.  It may also be the only way to have a chance to lower the debt.  I am not sure this will be politically possible as the effects on Portuguese society will be devastating.  Only if combined with a strong civic involvement and movements do I foresee a possibility.

Today the Greek unemployment figures for August were announced.  Since the crisis started, unemployment has gone up from 355000 to 908000.  That corresponds to a current 18.4% and a whopping 43.5% youth unemployment.  I want you to look at these figures just once more.  They. Will. Be. The. Reality. Here. Soon.  And they may very well become worse.

You know the current Portuguese figures and the official previsions?  The current unemployment is 12.5% and the alternative reality economists are giving previsions of 13% to 13.9% for 2012.  This is of course bull - a minimum 25% of all companies and shops will have closed in Portugal by the end of 2012.   A minimum of 200000 families will go broke.  The main stream media (and the government) has been very quiet about current youth unemployment in Portugal as the number is shocking:  27.1% - the 4th worst in Europe.  Our neighbor Spain is the leader with an unsupportable 48%.  Furthermore, be aware that youth unemployment is the number for unemployed young people between 15 and 24 and it does not count young people studying.  Therefore the real youth rate is probably around 50% more.  In other words.  If you are young and looking for a job - nearly no matter your qualifications - you are screwed.   Hence the dreadful defeatist destructive official message from the Portuguese government:  Emigrate - there is no future here.

Portugal will soon reach Spanish and Greek numbers.   Can you imagine what that will do to the economy and the cohesion of society?  The crisis is no longer theoretical - even though we are barely feeling the big one coming up.

I usually exaggerate and add a few attempts of being funny to my articles such as jokes, funny cartoons or relevant pictures.  But this is the reality, utterly serious and not a joking matter.  I imagine you are revolted - specially if you are living here in Portugal.  It will take much suffering and hard work to overcome the very difficult times - years - ahead.

I wish we could at least have the satisfaction of seeing the responsible persons: politicians, corrupt officials, greedy dishonest private sector managers and "the boys" being punished for bringing the country into this position during the last at least 20 years - but that will not happen - on the contrary they will get to keep most of their ill gotten gains and will be the ones least affected by austerity.  Maybe some kind of truth commissions such as those used in South Africa after apartheid may bring some closure to the serious crimes committed.

On the other hand, I do believe that the hard lessons learned will help to prevent it happening again in the future and permit creating a more healthy democracy for the people by the people.  The people deserve it.