Country report – Portugal: Finance Minister wants to scrap austerity measures

Many healthcare bills remain unpaid. Public service with 35-hour week. European Central Bank buys worthless state bonds.


The new left-wing government of the heavily indebted country has expressed several times that it wants to put an end to existing austerity measures “immediately” and not to introduce further ones at all. According to Finance Minister Manuel Caldeira Cabral in an interview with “”, this is a result of the “successes already achieved by Portugal”. This opinion clearly contradicts numerous international economists. They refer to a sobering forecast for productivity and the current state of public debt. Persistently weak economic performance is likely to prevent the budget deficit from falling from 4.4 per cent of GDP to 2.2 per cent as agreed and repeatedly asserted. With a debt-to-GDP ratio of just under 130 per cent, only Italy and Greece have worse figures.  


In the opinion of many experts, this is in contrast to the rise in pensions as of 1 July 2016 and the introduction of a 35-hour working week with wage compensation for all public servants. Nevertheless, “politics” have prevented Portugal and Spain, which is without a government, from receiving a warning from Brussels. Portuguese bonds are widely regarded as being “worthless” by major rating agencies. Only the little-known Canadian agency DBRS has not yet downgraded their rating, which was reason enough for the European Central Bank (ECB) to keep access open for Portugal to Draghis’ bond-buying programme. The Portuguese Banks, major creditors of their over-indebted country, have invested around 60 billion euro in government bonds. As reported by, this represents 23 per cent of all loans. They also suffer from around 15 per cent of loans which are unlikely to be repaid. Consequently, in the event of a final downgrading of Portugal, around 38% of all bank demands would be of poor quality. This would lead to a further market financing of the banks. 


The state itself also contradicts statements made by the government. The healthcare system – which is structured on the British NHS – is almost completely dilapidated, many bills remain unpaid. Unemployment and emigration of skilled workers only intensify the problems, whereas hardly anyone understood what good a “35-hour week” in the public service could do.