LISBON: As Portugal’s government toasts its exit from an international bailout that imposed years of austerity on its citizens, small business owner Alexandra Capelo is in no mood to join the celebrations.
From Lisbon’s poorer neighbouring city of Almada across the River Tagus, 42-year-old mother of two Capelo is one of the nearly 800,000 people, or 15 percent of the workforce, still unemployed as the country takes back control of its finances.
“Things have gotten worse since last year, business and job-wise,” said Capelo, who has relied on a home-based sweets business to supplement her jobless benefits since being laid off as a graphic designer in January.
Today, Portugal becomes the second eurozone state after Ireland to exit a bailout, having stuck to the European Union’s recipe of belt-tightening to beat the euro zone crisis.
The ¤78bn rescue programme the EU and the International Monetary Fund assembled in 2011 for the nearly bankrupt country will formally conclude with Portugal’s budget in much better shape and borrowing costs at eight-year lows.
But a shock 0.7 percent drop in its GDP in the first quarter points to the risks inherent in an economic recovery plan which, by focusing on fuelling export growth by cutting labour costs, has become dependent on volatile foreign demand.
That data, released on Thursday, also illustrated how far the country is from a lasting economic recovery.
Portugal’s central bank highlighted the challenges, saying progress under the bailout was insufficient, and ensuring sustained growth and getting banks lending again would require further reforms.
But as a government no longer dependent on aid looks anxiously ahead to an election in 2015, these may fail to materialise.
For those who have lost their jobs or seen their pensions or their salaries cut, life in a post-bailout world raises painful questions: Were the reforms worth it and will they ever deliver enough growth for jobs and better living standards?
Further south in the industrial city of Setubal - one of Portugal’s poorest and plagued by high unemployment - there is little evidence of the growth that, before stalling, had returned to the country in the second quarter of last year.
“Levels of poverty keeps getting worse, especially among people aged 25-40 who lost their jobs,” said Constantino Alves, a priest who runs a “Social Restaurant” charity for the poor.
“We get young couples, parents with children seeking meals and aid. There are various small entrepreneurs who had shops here and are now in utter poverty, eating here. Many have lost all faith to find jobs. It’s a crisis of confidence,” he said.
The problem, say economists, is that reforms already implemented during three years of wrenching recession and austerity will only have a delayed impact.
Reuters
