“We’re Not Greece Yet.”

The view looking across Freedom Avenue, Lisbon

The view looking across Freedom Avenue, Lisbon

Sipping coffee outside a small café on Lisbon’s Freedom Avenue, it’s easy to forget that Portugal is a country in serious trouble.

It is, after all, a country of great history and architecture, incredible weather, and beautiful beaches. It is no wonder that an increasing number of Britons are opting to escape from the cold of the British Isles to visit the sunny Algarve. And yet, even brief conversations with the Lisbon locals reveals that Portugal is a bruised and brittle country. There is hope for the future but this is rarely matched with any real sense of optimism.

While meeting with people in Lisbon this week there was a clear sense that, while the country has been pulled back from the brink of disaster, it is not yet out of the danger zone. It is as if at any moment things might deteriorate once more. At Lisbon University, amid conversations about the financial crisis and the ensuing austerity policy, the most telling comment I heard was: “We’re not Greece…yet.” The inference was clear: yes things have been very bad, and in many respects they still are bad, but we’re not giving up; the future can still be bright.

The University of Lisbon is a fitting analogy of the Portuguese ability to adapt and to thrive by making the best out of what life throws at you. I was hosted by the Instituto Superior de Ciencias Sociais e Politicas (Institute for Political and Social Sciences); a school with a proud history, having taught its first lesson in 1906 in the presence of the then King Charles (whose demise thereafter signalled the end of the Portuguese monarchy). Today the university teaches more than 40,000 students spread across 18 separate schools including another of my hosts, the impressive Instituto de Direito Economico, Financeiro e Fiscal (Institute of Economic, Financial and Fiscal Law).

But while the university offers Portugal’s young the opportunity to learn and develop, the biggest problem facing graduates is the distinct lack of opportunities once they leave. Portugal has an unemployment problem. Moreover it has a youth unemployment problem. The national unemployment rate currently stands at a little over 15% (having come down from a high of nearly 18% a year ago), while youth unemployment stands at a depressing 35%.

I spoke to Alice Trindade, Vice President of the Institute for Political and Social Sciences who spoke of her worry that the talented graduates she sees passing through her classes will have no other option than to search for work outside of Portugal. And who could blame them? Even Portugal’s President Pedro Passos Coelho has encouraged young people in his country to move away from Portugal to find work. While President Coelho’s controversial words may be seen by some as sensible advice for job seekers, as a long-term economic policy it leaves much to be desired.

Proving the maxim that attitude reflects leadership, Portuguese people seem to share their President’s pessimism. Perhaps the most stark reflection of the dire employment situation in Portugal is the mere 7% of citizens who believe that it is a good time to find a job. In Germany, that number is 51%. Further, when asked about their satisfaction with living standards, only 54% of Portuguese citizens respond positively (compared to 82% in the UK).

Attitudes towards the government are equally negative. Government approval dropped from 41% in 2010 to 26% in 2013, which, although low, is unsurprising given the level of dissent over the government’s austerity policies. And it’s not just opposition to policies that’s fuelling the protests. There is a strongly held view in Portugal that government is corrupt. When polled, a staggering 91% of Portuguese people believed corruption to be widespread in government and business. To put that into perspective, that’s the highest percentage in the world on this measure, higher than Zimbabwe (78%), Russia (79%), and Nigeria (87%).

And so what next for Europe’s westernmost country? There are some statistics that are moving in the right direction for Portugal. Measures of entrepreneurship have improved in recent years with business start-up costs falling to 2.3% of GNI (down from 7%). On top of that, a number of social indicators have seen positive changes in the last four years: volunteerism is up by 5%, donations to charity have increased by 12%, and those reporting to having helped a stranger has increased by 13%.

Perhaps these strong social ties are an unintended consequence of the crisis, having caused people to come together to survive tough times. Whatever the reason, Portugal’s social fabric seems to be strong despite difficult national challenges. And that, at least, provides a small ray of optimism for a country in need of some good news.

This post first appeared on the Legatum Institute blog. 

 

Notes:

  • Most of the data used in this post is taken from the 2013 Legatum Prosperity Index™.
  • A country profile of Portugal can be found here.
  • A more detailed briefing about Portugal can be found here.
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Links of the Day…

A selection of articles that I have enjoyed over the last few days…

More Capitalism, not less of it, is the Answer – Ian Birrell
http://tinyurl.com/bkrkuwf 

What Data Can’t Do – David Brooks
http://tinyurl.com/d6sr8ds 

Real Conservatives cut spending before taxes – Daniel Finkelstein
http://tinyurl.com/bkax3wf 

The Great Think-Tank Bubble – Ken Silverstein
http://tinyurl.com/b2ydn8y 

Europe Needs Cameron’s Tough Love – Andrew Mitchell
http://tinyurl.com/c7d2ls8 

Michael Gove Interview – Daily Mail
http://tinyurl.com/dymruzc 

Europe

CamEUBy the time most Londoners were arriving at their desks last Wednesday morning, David Cameron was already delivering his long awaited speech on Europe, in which he outlined his plan to hold a referendum on UK membership of the EU (should the Conservative party win a majority at the next election). Both Wednesday’s and Thursday’s front pages made for very good reading for the Prime Minister.

The responses from commentators and parliamentarians has also been very positive. Toby Young, writing in his Telegraph blog, said that this was the best outcome eurosceptics like him could have hoped for and it provides eurosceptics with “a good reason to vote Conservative at the next election.”

Over at ConservativeHome Tim Montgomerie outlined four reasons why the In/Out pledge could be good news for conservatives. One: it demonstrates David Cameron’s leadership qualities. Two: it should win support from Britain’s centre right newspapers. Three: it diminishes the threat from UKIP (the party most likely to steal conservative votes at the next election). Four: it allows the Conservative Party to move on from Europe and talk about other issues.

Even Labour supporters, who may not agree with the policy, agreed that the PM played his hand very well. The referendum pledge leaves Labour between a rock and a hard place said George Eaton over at the New Statesman: “If Ed Miliband matches Cameron’s referendum offer, he will look weak. If he doesn’t, he will look undemocratic.”

The always brilliant Dan Hodges asks some serious questions of both Ed Miliband and his party and laments the absence of any serious Labour policy on, well, anything really. On Europe the damage “has already been done”, he concludes.

Today’s Sun provides an insight into why the Labour Party has not joined the Conservative position to support an In/Out referendum. It reports that Ed Miliband has taken the advice of his brother, David, who views a referendum as “too populist”.

International reaction to Cameron’s speech has been mixed. Almost immediately, French Foreign Minister Laurent Fabius described Britain’s position as “dangerous” and likened it to someone joining a football team and then wanting to play rugby. He went on to say that Britain was pushing for “Europe à la carte.” But the response from Angela Merkel was slightly more favourable, stating that she is “prepared to talk” and wishes to “find a compromise” with Mr Cameron.

While there was no immediate reaction from Washington, the Obama administration has previously questioned David Cameron over his position on Europe. See, for example, the comments made by Philip Gordon, US assistant secretary for European affairs, during a visit to London earlier this month.

Obviously, Cameron’s announcement is a welcome one for those who believe that the British people deserve a say on the UK’s future relationship with the EU. But for the foreseeable future it remains just an announcement, a statement of intent. It may have shifted the debate but it has not changed the game. The biggest obstacle to seeing it realised is still firmly in place: a Conservative majority at the 2015 General Election. And following last night’s vote on the Boundary Review, this is looking increasingly unlikely.