We need to bring Public Expenses down, not to raise taxes

This sum up my position. We need to rationalize the structure of the State, that is too complex and went far from its core competences. And we need to lighten the incredible drag that too high taxes are putting on Portuguese economy.

http://www.publico.pt/Política/carrapatoso-cortes-na-despesa-nao-significam-reduzir-salarios-ou-apoios-no-imediato_1486834

Why is the fall of the Government good news for Portugal

The Portuguese Government presented its resignation yesterday, after its latest austerity plan had been rejected at the Parliament. Still, what appears to be negative news for Portugal (we really need more cost contention, and that is being demanded by the economical and monetary union we are part of), may actually be a good thing. A few reasons for that:

- the latest Government has been reacting to the way events and news on the Portuguese economy play. But it has not showed any sign of political and economical foresight or political will and skills to implement proactive measures. As a result, medium-term impact measures, that could be producing results now and were clearly necessary to have been decided a year ago, were never done. Portugal's response to the crisis as so, as been slow and not efficient enough;

- Portugal's economy is riff on inefficiencies, steaming from very rigid Labor market laws and too-big-the-country and corrupt public institutions and sector. The measures to counter-attack the escalating debt issue have never even come close to this subjects. Still, they are at the heart of the Portuguese debt crisis;

- A clear example is the incredible number of public institutions, many of them with overlapped responsibilities or no clear mission. A plan was not put in place to tackle this waste of public money, steaming suspections of corruption throughout Portuguese society;

- Portugal should have asked for an intervention from IMF and Eurozone rescue funds. Actually, it should have done so a few months ago. Public debt last issues implied an interest rate far above 7% - an interest that Portuguese long crippled low growth economy cannot sustain. Still, political game stepped in here, playing against nacional economy;

- Then, one of the most important roots of Portugal's problem (maybe even the most important) is the absence of economic growth. GDP has seen a laggard performance over the last 10 years, with successive recessions or almost 0% annual growth rates. That steems from the fact that Portugal has not a country economic strategy, that focus on understanding the country's sustainable long-term advantages, and then delivering a solid country valid proposition and a strategy to enable it. This is critical, and should be at the backbone of any political or economical debate in Portugal;

- And last but not least, a political reason. After 6 years in command, several economic recessions, lots of debates, several corruption accusations, the (now departing) Government didn't have the political capital to really introduce any change - it has run out of energy and public good-will.

The point is now what political force will replace this Government. And, much more important, how will it tackle the most prement Portuguese economic issues - some of them are stated above. Present a good, solid plan for them, and you will have my vote.

http://edition.cnn.com/2011/WORLD/europe/03/23/portugal.austerity/index.html?hpt=T2#

Groupon 2.0

Groupon wants to change the way we eat and have fun? Maybe that's over ambitious - but what is detailed in this attachment is an incredible promotional tool for businesses! I really think this will be a small revolution!

http://edition.cnn.com/2011/TECH/web/03/18/groupon.food.mashable/index.html?hpt=Sbin#

A quick thought on interest rates

Portugal is now paying 7% of interest rate on its sovereign debt. That means that a country that is not growing (actually, the soundest GDP projections point out that Portuguese Product will decrease in 2011 and probably 2012 as well) will have to pay a debt growing at a 7% rate - a financial disaster for an already over-burdened country. Lets just recall that around 2/3 of total Individual Income Tax is already necessary to service debt.

On that situation, I think it is necessary to deeply think if it wouldn't be advisable to resort to IMF emergency fund - that would, at least, secure a 5% interest rate, a much needed decrease to allow for economic recover. And, it would also enable the room for much necessary structural reforms to the Portuguese economy.

Rigidity on Labor market

Portugal has an incredibly rigid Labor market - prompting youth unemployment and lower productivity, like I said in June http://my2centsontheworld.blogspot.com/2010/06/on-labour-laws-change.html .

Yesterday's demonstration was just another simple demonstration of that. Unfortunately.

http://www.publico.pt/Sociedade/protesto-geracao-a-rasca-juntou-entre-160-e-280-mil-pessoas-so-em-lisboa-e-porto_1484504

Portugal's way out

One of main problem for Portugal (and one that is at the roots of the interest rate point that Cristina is raising) concerns growth. GDP growth has been sluggish over the last years (and below Governnamental expenditures growth...). I think that Portugal should pursue an expansionary fiscal policy based on tax cuts. But... there are a few requirements that we need to solve before moving ahead:

- we need to have a more efficient public administration. Meaning, that Governmental expenditures must be reduced. We need to spend less money and still deliver higher value to our citizens (the People). (actually, our level of efficiency is so low, that a number of measures would probably be easier to implement than forecasted, but one must have political will to do those...);

- we need to clean up the State owned companies, that provide basic services - we need to understand and refine their business models. Most of them are operating at an incredible deficit situation - meaning they will be virtual bankrupt (actually, many of them already are) and drag down our efforts if we don't know how to tackle them;

- we need to understand what is our plan for the long run. What are Portugal's sustainable competitive advantages and how can we foster them. Because these will create growth and employment, better than any other - thus, we need to understand how can we support them, if necessary through fiscal incentives. We need to draw a plan for the long run - as Gen. Sherman once said "It is time we define our path by the stars in the sky, not by pursuing the lights of the passing ships";

- we need to bring further flexibilization to the Labor market. We have a below 35years-old skilled workforce under-employed, whilst basic qualifications and skills lack in companies. Why? Because it is extremely difficult to fire someone. Thus, even there we are performing below par...;

- and we need to do all of this whilst actually reducing public deficit. We must be sure that we do this whilst our revenues (fostered by GDP growth) grows above a reducing annual public deficit.

Now, this is all possible (for those who don't know me, besides being extremely shy, I am also a keen optimist), but you need to have an incredible political strength and will. It will be (because it is the only possible path) extremely difficult!

P.S- There is a simple alternative. We (Portugal) need to find oil!