Tags: Eurozone, Greece, Political Economy, Portugal, Spain, world politics, World-economy
Earlier this week, confronted by massive street protests and criticism from his coalition’s junior partner, the center-right Portuguese Prime Minister, Pedro Passos Coelho, reversed his controversial plan for “financial devaluation.” When tax revenues fell by 3.5 percent in the first seven months of this year–due to unemployment rates spiking to above 15 percent–against a projected increase of 2.6 percent for the year, it became apparent that Lisbon would not be able to meet the budget deficit target of 4.5 percent of GDP imposed by the troika of the European Union, the European Central Bank and the Interantional Monetary Fund as a condition for disbursing the next tranche of the €78 billion bailout they promised.
Passos Coelho’s solution to this dilemma was to cut employer’s social security contribution by 5.75 percent and finance this by increasing workers’ contributions by 7 percent. This would have been tantamount to a currency devaluation by significantly reducing unit labor costs and was heralded as a “potential game changer” by the IMF’s Poul Thompsen.
In the continued decline of the country’s GDP and high rates of unemployment, this proposal was condemned by members of the prime minister’s own party as well as by the leader of the junior partner in his coalition–the conservative People’s Party–and by many business leaders as well as of course by more than half a million people who marched in Portugal’s cities in the largest demonstrations since the end of the Salazar dictatorship in 1974.
“We are not the children of the revolution.” their posters said, “We are the parents of the next revolution.” Meanwhile, in Spain, the miners of Asturias have been battling the police for months with rocket launchers, and protestors jn Madrid were met with a fusillade of rubber bullets. With over half the youth unemployed, and the government of prime minister Mariano Rajoy planning to implement deeper austerity measures in order to say that these were taken by their own volition rather than imposed by the troika as a condition for a bailout, the right and the left united in opposition. In recognition of this united opposition, the riot police in Madrid hid their identity badges:
A startling example of police culture came in a tweet from José Manuel Sánchez of the Unified Police Union (SUP). “We support them not wearing badges for violent demonstrators,” he said during the demonstration. “Give it to them hard.” Television pictures of baton charges and rubber bullets suggest they did exactly that.
And in Spain’s second city, a million and a half people led by the provincial government marched for Catalan independence–here it was not merely the demonstrators but the regional legislators who were challenging the post-Franco accord.
Athens exploded as well in a burst of flames as the unions called a general strike grounding flights, shuttering shops, museums, and monuments, and docking ships for hours as over 200,000 people demonstrated outside parliament protesting the new round of austerity measures the three-month old government of prime minister Antonis Samaras. Though details of the cuts were not made public, it was expected to slash pensions, wages and benefits even more.
All across Europe, these riots seem a repetition of the ‘anti-IMF’ riots that raged across Latin America and Asia in the 1980s and 1990s. As Ha-Joon Chang writes
it is ironic to see the European governments inflicting an old-IMF-style programme on their own populations. It is one thing to tell the citizens of some faraway country to go to hell but it is another to do the same to your own citizens, who are supposedly your ultimate sovereigns. Indeed, the European governments are out-IMF-ing the IMF in its austerity drive so much that now the fund itself frequently issues the warning that Europe is going too far, too fast.
Just as the IMF number crunchers did not take into account the people whose livelihoods would be crippled by the savage cuts being proposed by the troika and imposed by their puppets in Athens, Lisbon, Madrid. But as the Gurardian editorialized:
Amid all their talk of haircuts (on debt values) and tranches (of loans), European leaders have barely talked about the people who are bearing the brunt, first of the crisis and then of the throat-clearing that passes for firefighting in Brussels. This is not accidental. The euro project has relied upon draining the politics out of the inherently political: the very existence of a 17-nation economic union without a common treasury is testimony to that.
The protests are now inserting the politics back into the issue–demanding that those who had no part in the financial mess created by the collapse of housing bubbles, bad loans, and high deficits should not bear the price of these costly gambles made by bankers and politicians. it is not merely the question of bad financial regulations–it is the more the question of democracy that is at stake in Europe. The Portuguese reversal of its “financial devaluation” is the first step towards reversing the tide of neo-liberalism! A small step for Portugal, a giant leap for Europe!