This Sunday was a wonderfully sunny day in Portugal. For a large part of the population, the ideal day for a getaway into nature. The kind of day that, should there have been some sort of country wide political election, abstention levels may very well have reached another record.
On this same day, the entire government joined in meeting to commemorate and performance review the completion of the first year of its mandate.
From day 1 this government has sought - and reasonably succeeded - to portray a business management style of governance, lean and mean, in constant search of demonstrating KPI's to very nervous stakeholders at home and abroad. Sceptical critics will argue that this government is simply acting as a management committee executing the action plan outlined by bailout creditors a year ago, a plan that was finetuned with troika delegates in about 3 weeks on site.
By means of perspective, the the overall economic structural reform bailout package of Portugal is about 80 % of the potential size of Spain's pre-bailout foreign aided credit line destined at the banking sector only. The geographic size of Portugal is less than Castilla y Leon, the economy's GDP nearly the same as Catalunya's, the population about equal to the residents and commuters of Madrid and Barcelona together. Portugal's goverment's fiercest regional struggle is with the individual populist governor of Madeira. Spain has the Basque country to deal with.
Maybe more than a decade ago, I heard a reknown Portuguese political commentator in a room filled with foreign businessmen mention that the Portuguese people are very easy to govern. A fact is that the near absence of protest in contrast to other countries in recent times has been international news.
Within one year this government has looked at more sensitive and structural issues than any other before, drafting packages intended to stimulate employment mobility, competition, swifter justice while simultaneously search for foreign investours and export markets for anything from wind energy to pastry. This on top of initial measures of salary cuts and tax increases.
Whereas Greece's need for bailout is explained by cheating of Eurozone convergence data, Ireland's by excessive confidence of its banks, for Portugal the exact causes are found in a long and wide variety of overspending and productivity gaps that have been fairly visible for quite some time.
The main issue on this Sunday's agenda will have been the unprojected and possibly unexpected downturn in corporate earnings and private consumption to the extent that the principal KPI regarding the deficit target at FY-end will not be met.
The troika memorandum is based on what a government can do.
It would appear that the Portuguese government overestimated its role as a mere agent in the country wide needed reforms, or maybe private producers and consumers underestimate their place in this endeavour. Either perspective is not new, at all. Any business or action plan, in order to succeed, needs alignment of the key players. Also not new.
Stormy wheather ahead.
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