Portugal: Development cooperation strategy and more social protection are needed

Since joining the Euro in 1999, Portugal has had the lowest growth in the Eurozone. Between 2001 and 2007 Portugal experienced only 1.1% average annual growth. The government deficit was -6.5% of GDP in 2005 and it was -3.1% in 2007. When the global financial crisis occurred, a drop in tax revenues and the money allocation to support commercial banks, led to further increases in the government deficit and in general gross debt. At 108.1% in 2011, Portugal had the third highest general government gross debt to GDP ratio in Europe (EU27), behind only Greece and Italy (Eurostat, 2012a). As debt continued to grow investors were unwilling to lend and in May 2011 Portugal was the third country to seek a ‘bailout’ from the EU-ECB-IMF troika. The austerity measures accorded between the Portuguese Government and troika, are responsible for major setbacks. Many basic economic and social rights that were guaranteed are now being either questioned or neglected. In this scenario, the development cooperation public policy that contributed significantly to the achievement of the Millennium Development Goals (MDG) also suffered a major negative shift.

The policy response to the 2008 financial crisis, was the implementation of a progressive stringent set of austerity measures: freezing of nearly all insurance benefits and pensions, reducing the pensions tax allowance, reduction in means-tested unemployment assistance, family benefit and social assistance, increase in standard VAT rate (from 20% to 23%) including increasing the VAT on natural gas and electricity to standard rate, increase in income tax rates and reductions of tax credits, public sector pay cuts (up to 10%), reductions in numbers of employees in central Government and across public administration generally. According to OECD, in September 2011, the Portuguese Government announced an 11% reduction in the NHS budget for 2012, twice the budget cut under the EU/IMF bailout agreement. The actual figures of OECD indicate that spending in health for the year 2011 fell 5.2% compared to 2010 when the average of all countries of the organization was a growth of 0.7%. The objective for the Public spending on health, in 2013, is to achieve just over 5.1% of gross domestic product (GDP), while the average in the euro area is estimated to be approximately 7% (Morgan, et al., 2013).

Amongst the measures proposed for 2012/13 are: reductions in pensions (with different approaches to different levels: including cuts for those with pensions of between €600-€1,000 per month, and freezing of pensions below €600 per month, with potential marginal increases for those on the lowest levels), controlling costs in the health sector, reductions in costs in education by €380m, reductions in social transfers (other than pensions) of at least €180m by tightening eligibility criteria and decreasing some benefits, increasing personal income tax, reductions in numbers and in wages of government employees. In 2013, the Government and the EU-ECB-IMF Troika will decide a further permanent cut of 4 billion Euros in public expenditure, mainly related to the welfare state (heath, education, pensions and social protection) (Leahy, et al., 2013).

Given the high levels of unemployment and poverty already being experienced in Portugal, and the findings that early measures disproportionately affected poorer people, very serious impacts might be anticipated on vulnerable groups, putting at risk the more elementary economic, social and cultural rights. For these reason, we highly recommend the implementation of a human rights based approach to national budget and welfare state reform, allowing the social protection of the powerless and dis-empowered groups.

In what concerns Development Cooperation Policy, and as a lesson learned from the financial crisis, we believe it should become a State Policy. As a government policy is subjected to all electoral and economic cycles and the respective changes that often occur despite the commitments made with partner countries, Civil Society and most important with the people in needs. It is also crucial that Portugal sets the means to meet the “untying of aid” commitments as by not doing so is deliberately stealing with one hand what gave with the other. It is highly recommended that Portugal aligns with Busan principles, namely with transparency and predictability, to allow fostering both accountability of its practices and strategic programing to its partners.

Note: Troika is the name given to the Portugal creditors group composed by the European Commission (EC), the International Monetary Fund (IMF) and the European Central Bank (ECB).

Source: 2013 Social Watch National Report from Portugal