Portugal’s Economic Policy: A Victory for the Left, A Failure for Young People

In an opinion piece in the Guardian, dated 24 August 2017, entitled: “No alternative to austerity? That lie has now been nailed”, the author Owen Jones praises the Portuguese Socialist government for having reversed the austerity politics of the previous right-wing coalition government, and that of the troika that directed the country’s finances during the recent bailout phase. He argued that the economic politics implemented by the Portuguese government, characterised by a reversal of austerity politics, is a shining example for all of Europe to follow. This is, unsurprisingly, the same discourse that has been peddled by the Portuguese Socialist Party and its more left-wing allies, the Portuguese Communist Party, and the Left Bloc.

Sadly, this depiction of Portugal as a shining city on a hill does not translate to reality, especially for Portugal’s youth. The overall economic conjuncture remains fragile and unsustainable, and if things are bad for the economy as a whole, they are even worse for Portugal’s young people. The following is not a pro-austerity piece: Portugal’s economic development in recent years is undeniable, and I am not in favour of blind austerity politics, the negative effects of which have already been clearly shown. My aim will be to explain that Portugal’s youth remains in dire straits, and that the rhetoric being peddled by socialist circles in Portugal and abroad only serves to feed a complacency that is dangerous to the country’s long term economic development.

Firstly, in order to understand the position in which Portugal’s youth finds itself, a quick look must be given to the fact that Portugal’s overall economic conjuncture remains far from healthy. Both the banking and business sectors remain extremely fragile, and if left untended, to will subdue Portugal’s economic growth in the long-run. Portugal’s banking sector remains plagued by an excessive amount of non-performing loans (NPLs). In its 2017 Country-Specific Recommendations for Portugal, the European Commission stated that ‘The stock of non-performing loans remains high and, together with low profitability and relatively thin capital buffers, they pose risks to banks’ balance sheets’. Having rejected the idea of forming a bad bank in which to group NPLs, Portugal’s government has yet to take concrete steps to solve this issue. In addition to this chronic problem, Portugal’s business sector remains chained by excessive bureaucracy, which not only curbs competition but which also represents an obstacle to new businesses. The 2016-2017 Global Competitiveness Report underlines inefficient government bureaucracy as one of the main obstacles to doing business in the country, along with excessive tax rates and policy instability. These, along with an inefficient judicial system, are all issues that have not been tackled by the current administration, and which represent a long-term structural weakness in the Portuguese economy.

This is only a snapshot of the economic malaise that persists in Portugal, but it is one that has very acute consequences for the country’s youth. Despite the decrease in overall unemployment, which has drawn much praise from socialist circles, youth unemployment as a percentage of youth labour force in March 2017 remained a staggering 23.3%. This reflects the difficult situation that the country’s young people face, as well as the fact that the administration has not been paying enough attention to young people in Portugal. It is a trap from which it is very difficult for a young person to free themselves. If a young person wants to set up their own business, for example, they are faced with a barrage of endless bureaucracy, difficult access to finance and a poor judicial system. Add to that the lack of jobs, and the culture of precarious employment and unpaid internships, and the result is that many young people are faced with a situation where they have no alternative but to emigrate if they want to create a future for themselves.

This dire economic situation is exacerbated by Portugal’s sub-par education system, with particular reference to secondary and higher education, and the skill mismatch that exists between our young people and what is sought after by the market. In 2015, Portugal remained below the OECD average for percentage of young adults aged 25-34 years that completed upper secondary education. This situation is only made worse by the fact that a student’s performance remains very much linked to their socio-economic background, something which betrays a lack of equality of opportunity and limited social mobility, barring many young people from achieving their full potential. Deep education reforms are necessary to ensure that every young person has the same opportunity to achieve their potential, and that the skill mismatch that exists is reduced.

The situation for young people in Portugal shows that Portugal is not an example to follow with regards to economic policy. Rather, Portugal needs to do more to attain sustainable long-term economic development. And, while it’s at it, it could also develop a proper strategy for its young people, who continue to be neglected by their government, be it Socialist, Conservative, or any other traditional party in Portugal.

Jorge de Jesus is active in liberal politics both at an EU level and at a Portuguese national level. He is an Individual Member Delegate of LYMEC, and is responsible for Youth Relations and International Partnerships at Iniciativa Liberal.