The Covid is sweeping the Portuguese economy and putting an end to the model of tax exiles à la “Ibiza”. – EconomyMorning


Portugal has just elected its new President of the Republic. Reminder of the economic and political issues.

The 2011-2015 period

Sees Anibal Cavaco Silva (center-right PSD) as President of the Republic for the second time (2011-2016) with a center-right government led by Prime Minister Pedro Passo Coelho (2011-2015). It is the time of the Great austerity terrible economically for Portugal and which was intended to obtain the financing of the Troika and the credibility of the financial markets: privatizations, freeze of civil service salaries, all Portuguese still remember this period which saw the poverty rate of the population explode.

The 2015-2018 period

Sees Anibal Cavaco Silva being replaced in 2016 by the hugely popular Marcelo Rebelo de Sousa, PSD. But above all, Europe will experience a Revolution in terms of economic policy: it is a left-wing coalition led by Antonio Costa (PS) which wins the legislative elections in 2015 and which will upset economic policy in Europe. In the jargon of international politics we call this coalition (up to the Communists and the libertarian left bloc) the Geringonça, which can be translated as “unexpected alliance”. This period was euphoric for Portugal: growth rates higher than those of Germany, deficit adjustment with an ultra-demand-driven policy, unemployment rate reduced to 8% against 17% in the previous period, surpluses in the balance of goods and services, productive investments, improvement of student conditions, end of disinflation competitive (with eastern countries as competitors) and upscaling of the economy. In short, Portugal is a successful example of a perfect demand policy and deals a fatal blow to Merkel and Europe indoctrinated by orthodoxy and austerity.

The 2018-2021 period

Is that of President Marcelo Rebelo de Sousa and Antonio Costa reelected in 2019. But Portugal is experiencing a surprising economic turn. Portugal decides to make its country an Ibiza to attract foreign capital via multiple tax exemptions of all kinds (golden visas …) and facilities for real estate investment. But in addition to this is added an economic policy extremely favorable to tourism which now weighs 15% of the GDP, unprecedented in Europe through the development of trade, hotels, restaurants …It is the fatal mistake of wanting to attract capital in this way without building a solid economy in its foundations., especially by taking an inappropriate turn breaking the dynamic launched by the “Geringonça”. Of course, we reacted, but far too late and in the midst of a health crisis.

Indeed, the Covid crisis has accelerated the awareness that a shift to “Ibiza”, to make Portugal a tax haven structured around Tourism-Catering-Commerce-Hospitality is extremely fragile. Today, more than any other country in Europe, Portugal is experiencing a deep recession from which one still wonders how it will come out. Certainly, an ultimate hope with the latest stimulus plan which substantially resembles the French Plan : investment in public infrastructure, education, energy transition and not just the bars and restaurants that we appreciate moreover.

Still, the health crisis was serious in Portugal because of the summer holidays and the British variant and a political crisis should not be neglected despite the great popularity of the President. In addition to a health and economic crisis, Portugal could also experience a period of political instability.