This is a good figure but don't take it too positively

A 1.1% growth of GDP in Q2 vs Q1 of 2013 is a good result for the Portuguese economy and one that should fill our hearts with hope (literally). But we should not take this as a sign that everything is well:

1) GDP evolution is accurately measured only when comparing vs previous year. That means we should be comparing Q2 2013 vs Q2 2012. That is so as each Q has its own dynamics - the best example is Q3, that is impacted by summertime seasonality, which makes "product"go up (people consume more). When we look at Q2 2013 vs Q2 2012, we still got a -2% GDP evolution. And that is not positive.

2) Many of the structural reforms that Portugal needs are still to be done. Which means this positive figure is only capturing the impact of some of the measures already taken (namely in terms of... lower Labor costs, aka, lower salaries) and context (and Germany and France, two of our biggest markets, have just announced higher GDPs than expected). To make growth sustainable we need to do what I have been saying in the past 3 years (at least) - growth strategy, reduced Government weight, leaner judicial system, higher productivity.

So, lets take this figure as a recharge to our hearts, minds and hopes. And lets make sure that we do what is needed to achieve sustainable growth, and (through private investment) reduce the pornographic unemployment levels that Portugal still has.

http://www.publico.pt/economia/noticia/portugal-sai-da-recessao-com-crescimento-de-11-no-segundo-trimestre-1603064

Nothing new

Everybody knows that the Portuguese economy is choked by high taxes and that is one of the reasons for its slow recovery (by the way, don't dare to think that is the only one...). And a main reason for that is exactly the high level of unproductive bureaucracy and Government footprint in it. But the Passos Coelho Government has been extremely passive and slow at tackling the problem - it should have been one of its first measures, when it still had the voters confidence (and especially since it is known that budget cuts and simplification efforts take at least 1 year to be reflected in sovereign accounting). Additionally, doing it only now is submitting the Portuguese economy to another shock and stretch. But lets not try to dodge the obvious - the Portuguese economy needs to simplify its public administration, severely cutting unproductive expense, redirecting public investment to strategic areas (though nobody knows what they are; another major failure...) and lowering taxes. That is the only way to generate growth and employment (though we would face a short term shock on this area, as we would have thousands of public servants unemployed - and that is a problem on its own, that could have been minimized if this had been done 3 years ago, as it should...).

http://www.publico.pt/economia/noticia/primeiroministro-afirma-que-economia-nao-se-recupera-aumentando-impostos-1601584

I agree with António Barreto

I think I already said it, and I will say it again - António Barreto is a rare wise voice in Portuguese politics. And the way he clearly states that politicians think that the party is more important than the country and that has terrible costs should be at the core of the political discussions in Portugal - the fact that politicians will simply brush aside his comments is just another side of how corrupt parties have became.

http://www.publico.pt/politica/noticia/antonio-barreto-diz-que-politicos-nao-sacrificaram-os-seus-interesses-1601386

Movimento Revolução Branca

They came to my (and I think almost everyone's) attention a couple of months ago when they blocked a number of candidates to mayor positions, based on a possible Constitutional infringement. They blocked them on the Courts, independently of political affiliations. And that was a very good sign.

Now, they are asking for the Portuguese society involvement, in bringing to light possible violations of public management or of citizens rights. They aim to  make sure citizens are respected, holding politicians and public entities responsible for the Laws they break. And I can just applaud this.

http://www.publico.pt/politica/noticia/movimento-revolucao-branca-recruta-voluntarios-para-investigar-denuncias-1596510

Only 40%

There are around 4464000 workers in the Portuguese economy versus a population of 11000000. Does anyone think that this is sustainable? We need to steam growth back to reduce unemployment, but also to increase retirement age. It is simple - 40% cannot support 100%. Never!

http://www.publico.pt/economia/noticia/economia-portuguesa-recuou-4-no-primeiro-trimestre-1596484

A good measure

Italy's decision to boost their payment terms to improve cash-flow in the economy is a good step - a very good one. Many people claim Southern European economies need subsidies and stimulus packages, but a first step should actually be to clean debts that are paid 1 year later than agreed. The only problem - it deepens the Government's cash flow crisis...

http://www.publico.pt/economia/noticia/italia-paga-40-mil-milhoes-de-euros-aos-fornecedores-para-estimular-economia-1590395

I always said the way was to cut headcount

Portugal's Constitutional Court (that acts like a Supreme Court, ensuring Constitution is respected in all legal decisions in the country and legislative documents) has been clear - cutting public administration wages is not the way. Something that I fully agree, as it is a downgrading of capabilities at State level - it is not motivating, it just pushes out of the door the best talent there is in the State bureaucracy,... For me, the solution has always been to implement a meritocracy system in public administration (including performance evaluation, of course) and ensure that the worst performing talent is cut. I believe that a significant part of the solution of the solution for the budgetary crisis in Portugal is public spending cut through simplification (and thus headcount, as I am saying here) and tax softening, to ensure economic growth.

http://www.publico.pt/destaque/jornal/decisao-do-tc-poe-maioria-em-choque-e-forca-renegociacao-26338707

70% of Portuguese electric power was generated by renewable sources

And that's good news - especially for a country that has a serious issue on its foreign oil dependence. For me, renewable sources are a key strategic bet. I have previously criticized the ones who decided not to pursue it as vigorously as before - and I hold my ground. I only think the below article misses the link to foreign accounts impact.

http://www.publico.pt/economia/noticia/producao-renovavel-abastece-70-do-consumo-nacional-de-electricidade-no-1%C2%BA-trimestre-1589896

Politicians don't understand economics

Let's be clear about it - most politicians don't understand economics. Which is a huge conundrum for me, given the fact so much of their job is actually related to it.

Some politicians might know a bit about governamental budgeting (not sovereign accounting, ok?), but they can't actually understand how an economy works at micro-economic level. When we start discussing about economic decision making at individual level, their insights are (at best) clogged or (more usually) simple guesses. You can clearly see it in the European Union initial proposal to bailout Cyprus banks (which, to "give a lesson" to a 0.2% eurozone economy, the EU decided to actually risk faith on its entire bank system), on the lack of proposals to propel the european economy back to growth and cut on spending (instead, european politicians prefer to raise taxes...) and the demagogy of not applying keynes theories to the fullest, on reducing public investment in times of growth to prevent market bubbles. But especially we can see it by their lack of focus on individual agents competitiveness, on the fact they don't really understand the value of innovation and differentiation to an economy, what is value accretion, the potential of higher education (maybe because a relative number of them has never really got one - but bought it).

When monetary policy became (almost) irrelevant, portuguese politicians (as an example), never understood that productivity should actually be the focus point of their economic speeches. But besides some hollow statements, this was never seen.

The european mess we are all going through arises mainly from the fact most politicians are mainly focused on tactical vote-gaining tactics or simple treaty negotiations - supported by an electoral bases that doesn't understand the growth of D&E countries actually hindered europe's competitiveness, pressing for productivity, innovation and differentiation.

To get out of the crisis, europe needs inspiring politicians, that understand the value of solidarity and growth, that can look at economic tissues and how to reinforce their competitiveness (or let them die and be replaced by others), that nurture micro-economics strategy - politicians like barack obama. If not, europe is on a crash course to become utterly irrelevant - and a lot poorer!

- Posted using BlogPress from my iPhone

I agree and disagree

I agree with Selassie when he says that Portugal needs to implement the adjustment program. But I can't accept that he doesn't mention that the prime mistake of this program is its deployment, focusing more on taxes than on Public Spending cuts (hence the way it is overburdening the economy). And I disagree on one key point - we need to start investing for growth in our key economic clusters.

Like all macro-economists, Selassie forgets about the micro world - which is actually the key to get over this crisis.

http://www.publico.pt/economia/noticia/fmi-diz-que-evolucao-do-desemprego-em-portugal-e-infeliz-1588955

Politicians still answer to the courts

So that is one of the dimensions where the fight against corruption and a perverted political system needs to be fought. By civic movements that actually sue politicians and the State. That has worked once and more in the US where it is a deeply rooted practice - just think about Chicago, where concerned citizens were able to save the downtown lake front by suing the city... twice!

But in the US, courts are actually more powerful than in Europe - democracy is actually stronger there. There is a tradition of Power of Law and Constitution Power that is at the root of the State - and where Congressional, Presidencial and Judicial powers are clearly split. I am not that sure if that is the case in Portugal...

But just the fact that we one candidate is being blocked is an initial good sign. Let's see, though, how this actually unfolds in the mess of appeals that politicians have put into Law in Portugal...

P.S- I have nothing against Fernando Seara (I don't have a bad opinion of him). But the Law should be interpreted in a specific way, and not twisted to serve momentarily political needs.

http://www.publico.pt/politica/noticia/tribunal-impede-fernando-seara-de-ser-candidato-as-eleicoes-autarquicas-1588456

I listen to this gentleman

This is one of the few Portuguese politicians that I listen to all the time. Because of his balance, of his tranquil courage, of the political and social vision that he is able to interlink with economics. It is a (rare) pleasure to listen to him. 

http://www.publico.pt/politica/noticia/disfuncao-entre-classe-politica-e-o-povo-e-cada-vez-maior-diz-jorge-sampaio-1588363

You should have sticked to the plan

IMF and EU's plan for Portugal was not the one that was actually followed. The agreement stated that 1/3 of the necessary public recovery should come from taxes and the rest from Public Spending savings. This would ensure that we would be cutting on the least productive and ROI public activities, while partially sparing the weak Portuguese productive system (undermined by a very noncompetitive economic environment, unclear public directives and businesses and lack of proper education and management levels). Unfortunately, that was not the path that was then followed - Portuguese politicians (with the whispering blessings of Brussels and Washington) decided that it was not a good idea to face the Public bureaucracy and spending monster, and went softer on those cuts - transferring most of the burden to tax payers, and generating thus further inefficiencies in the economy. Remember may article on the failing multipliers ( http://my2centsontheworld.blogspot.pt/2012/10/austerity-multipliers-failing.html )? This is exactly it...

The result is at sight - it is called a crisis spiral, has, as I have already written a couple of times, heavier measures to control the deficit are generating deeper wounds at economical level that aggravate the deficit, until the budget and economic situations are simply unsustainable. How to get out of this? I already said - Portugal needs to cut inefficient spending (especially at Public level) and define and pursue a strategy for growth. If we have enough funding in the system to potentially generate that growth is though a question that is turning bigger and bigger...

http://www.publico.pt/economia/noticia/o-dobro-da-austeridade-resultou-em-quase-o-dobro-dos-defices-previstos-1588009

A very dangerous step

And then, suddenly, EU goes a step too far. Imposing a out of the blue tax on bank deposits in Chipre simply casts a cloud of doubt and uncertainty that might ruin the whole European banking system. There is no way depositers in Greece, Portugal and Spain will keep their trust in the system.

This is problem just another piece of the perfect storm that is mounting in Europe - absence of strategy, low productivity, lack of politycal competence, all the ingredients of a nightmare.

http://www.publico.pt/economia/noticia/aprovada-ajuda-financeira-a-chipre-que-inclui-imposto-sobre-depositos-1588011

http://money.cnn.com/2013/03/16/news/economy/europe-cyprus-bailout/index.html?hpt=hp_t3

A trend worth protecting

Portuguese R&D has been on the rise recently, a very positive trend that not everyone is aware of. The fact is that Mariano Gago's research strategy of moving it closer to businesses and open universities to the external world paid off - and, nowadays, Portugal has thriving research results. It urges to protect this very strong trend, a clear growth driver that pays off after a few years of insistence (as we are already seeing in several fields).

http://www.publico.pt/ciencia/noticia/sobrinho-simoes-avisa-que-cortes-cegos-podem-matar-investigacao-nacional-1587392

Return On Investment

If a measure has a 300% ROI it is a positive one. If even the hard economist measures indicate a positive return versus cost, then, why not do it? But, if the positive effect it has in a society outruns all the costs by far, how can we not do it? The evidence is there! When will we move to ensure retro-viral medicines are widely available and affordable to everyone?

http://www.publico.pt/ciencias/jornal/acesso-generalizado-a-antiretrovirais-antihiv-leva-a-aumento-espectacular-da-esperanca-de-vida-26105933 

2 cents on bonuses

The debate has been raging on - but has been misconducted. European Union's proposal to limit bank bonuses to 1 month worth of salary assumes (has usually politicians do) that the world is immutable - and it is not. The truth is such a measure will have 2 short-term effects (and no long term benefits) - it will move talent out of European banks, to geographies where this limit doesn't exist (I thought France had learnt something with their 75% tax measure, but it doesn't seem so), and it will increase wages to compensate for lower performance bonuses (exactly the opposite effect you want to have in an economy that desperately needs growth). So, alas, once again, European politicians show their short-sightness and why the continent is now in serious troubles, with the increasing integration of all the economies on a global one.

Now, I understand and accept the root of this measure (except the populist part, please). The fact is that shareholders have lost control on corporate performance bonuses and they are increasingly biased to consider only short-term performance. This is a fact and problem. But the solution should be to tie bonuses to sustainable longer-term growth - and not short term spasms. 

http://www.publico.pt/economia/noticia/uniao-europeia-quer-limitar-os-bonus-na-banca-ao-valor-de-um-salario-1584847

http://edition.cnn.com/2013/02/17/business/eu-bank-pay-curbs/index.html?hpt=hp_bn1

Irreversible spiral?

The news that unemployment in Portugal is now at 16.9% level (above IMF and Portuguese Government predictions) and that employment levels have never been so low is a very bad sign - it results from low economic competitiveness and short-sighted financial policies. I sadly predicted that a couple of months ago ( http://www.my2centsontheworld.blogspot.com/2012/09/how-to-kill-economy-with.html ) - and believe me, I would prefer to be wrong!

The fact is the irreversible spiral that I predicted in September is now happening - and will only get worse if we don't break it. Portugal now needs the courage to deepen its unproductive public spending on Public Administration, avert from tax raises and understand how to efficiently invest using European Union funding - if we want to get out of this doomsday spiral, this is the way to do it. But we have to do it now!

http://www.publico.pt/economia/noticia/desemprego-salta-para-os-169-no-ultimo-trimestre-de-2012-1584319#/0

Never forget the lessons from the past!

When you try to re-write history, you lose information that might help you in the future. Politicians often forget that, though. It is a huge mistake!

http://www.huffingtonpost.com/2013/02/13/paul-krugman-marco-rubio_n_2678275.html

Good!

I must say I am considerably relieved by the news that Portuguese Distric Attorney Office rejected the complaints against blood diamonds revelations. Freedom on Speech is a keystone in Western civilization, and, by doing so, Portuguese Law reaffirms its commitments to both Human Rights and equal justice.

http://www.publico.pt/sociedade/noticia/ministerio-publico-arquiva-queixa-contra-diamantes-de-sangue-1584172

Figuring out...

I am still figuring out what are the Portuguese Government plans to reduce public spending in order to allow taxes reduction and thus economic growth. If this isn't done, we will only see a constant choking of the economy, pretty much as we are seeing right now....

Why are we discussing costs without mentioning service?

I will never understand how is it possible to issue a report that focuses solely on costs - without any reference to service levels! The highlight that Portugal has cut twice the amount of negotiated costs might be good or bad - it depends on service levels. If service levels hold at the level that they were supposed and Portugal's has got twice the savings, that is good. If not, that is bad! But costs can't be discussed without pairing them it service! Portuguese tax payers want to have a specific level of service for the minimum cost - of course! So, don't try to look at costs separately, please!

http://www.publico.pt/sociedade/noticia/ocde-diz-que-portugal-cortou-o-dobro-na-saude-do-que-acordou-com-a-troika-1582923

There are no free lunches

If you get higher interest rates, that is because you are investing on higher risk assets. And you need to assume those risks - you are getting higher compensation because of that, remember? If those assets default and don't pay back, you need to assume your losses. I know it is is grim and might seem cruel (it is, actually), but that is why you should strive to manage balanced portfolios.

EFTA's Court (I had no idea it still existed!) rule just highlights and presses on the sentence - there really aren't free lunches. Higher return, mean higher risk. If not... why shouldn't we all be doing that?

http://www.publico.pt/economia/noticia/islandia-vence-caso-icesave-e-nao-tem-re-reembolsar-reino-unido-e-holanda-1582473

There we go again

Over the past 3 years, I am always asking the same 2 questions to Portuguese politicians:

- When do they start seriously cutting public expenses?

- What is their strategic plan for growth?

I would just like to state that, as any of these questions has been so answered so far, I will keep on hammering them. Sorry...

Kirchner's flight?

Argentina is financially broke. Only the ones who have limited contact with the country don't realize it. The social instability (limited and contained looting in a couple of specific incidents are the most recent examples), galloping inflation, capital flows limitations, power shortages, unstable power of law show it clearly. And the crescent rhetoric concerning the Falkland is just another clear example of it - because it again (like in 1982) seems like a Government trying to shift internal attentions from economic problems to sovereign ones. 

Argentina doesn't deserve this. It is not broken as a nation. Argentinians are incredibly proud, hard-working and resourceful. They have governing issues (they have had so for many, many years, probably since the beginning of the XX century, like my country), but I am sure they will be able to overcome them. And I really hope so - because I love the country, the nation and have high expectations of it.

http://edition.cnn.com/2013/01/03/world/europe/argentina-falklands-letter/index.html?iref=allsearch