Portugal’s painful austerity programme runs into trouble
Pedro Passos Coelho, Portugal’s prime minister, is one of Europe’s staunchest backers of austerity. But his government’s painful two-year programme of structural adjustment has yet to deliver the results promised. And late last week, the country’s constitutional court issued a ruling that could fatally undermine his efforts to get the economy back on track.
♦ Cuts to welfare payments in the UK will hit northern communities as much as five times as hard as the Conservative heartlands of the south. Take a look at the FT’s Austerity Audit interactive to see all the research and reporting on the effects of the current government’s radical reforms.
♦ Brazil is grappling with a Congress where “foxes” are often in charge of the henhouse.
♦ The Egyptian armed forces participated in forced disappearances, torture and killings during the 2011 uprising, despite publicly declaring their neutrality.
♦ Mona Eltahawy explains why satire is a serious subject in Egypt: “What is satire if not a marriage of civil disobedience to a laugh track, a potent brew of derision and lack of respect that acts as a nettle sting on the thin skin of the humourless? And what is revolution if not the ultimate act of derision against the established powers.”
♦ Marc Lynch wonders if his initial assessment of the Muslim Brotherhood was wrong: “both academics and policymakers need to recognize that the lessons of the past no longer apply so cleanly, and that many of the analytical conclusions developed during the Mubarak years are obsolete.”
♦ Robert Driessen, one of the world’s most successful art forgers, tells his story (from Thailand, out of the reach of European authorities).
♦ Alexei Navalny, the Russian opposition leader who plans to run in the 2018 presidential election, will be put on trial next week. Georgy Bovt explains why he will go to jail. Read more
(AP Photo/Thanassis Stavrakis, Pool)
Listening to François Hollande’s comments on his flying visit to Greece earlier this week was like hearing a reprise of his electoral campaign, in which he promised to lead a European-wide fight against austerity.
In Athens, Hollande praised the Greek government and said that, for Greece – “The next phase is one of growth and creating jobs, not more sacrifices.” Sadly, although there are signs that private-sector investment in Greece is picking up, there is also certainly more austerity and more job cuts to come, in the public sector.
President Hollande was only in Athens briefly, and so is hardly likely to be held to account for his remarks in Greece. What is more problematic is that the latest figures suggest that he will be unable to hold off the drive for more austerity back home in France. Economic growth is down and the French economy may even shrink in 2013 – compared to the Hollande administration’s initial projection of growth of 0.8%. Partly as a result, France is going to miss its target of getting the country’s deficit below the EU-mandated 3%. Read more
By Gideon Rachman
In the 1970s, Mogens Glistrup, a prominent Danish politician, became famous for suggesting that his country replace its armed forces with a recorded message saying “we surrender” in Russian.
There was a big kerfuffle in October when the IMF made a point of saying that it (along with a bunch of other forecasters) had underestimated the effect of fiscal tightening on European economic growth over the past couple of years, with obvious implications for the troika’s austerity programmes for the likes of Ireland, Greece and Spain.
The admission got some predictable pushback from troika members who have drunk deep from the austerian well. It was also questioned by my colleague Chris Giles, who pointed out that the results were highly sensitive to the inclusion in the sample of outlier countries – especially Germany (which, despite its frugal prescription for others, has itself followed expansionary fiscal policy and enjoyed good growth) and Greece (the opposite) – and possibly the exclusion of the Baltic states, which followed aggressive fiscal tightening to better effect than Greece. Read more
One of this morning’s reports from the EU summit is headlined – “David Cameron fails to cut EU bureaucrats pay and perks“. With the EU budget talks collapsing on Friday afternoon, it appears to be true, at least for now. And it’s a great shame. I know that sentiment will deeply irritate my friends in the EU bureaucracy – some of whom have been emailing me to point out that spending on administration is a mere €6bn a year, which is less than 6% of total EU spending. Even so, there is plenty of waste in the EU budget that could be easily sliced away.
What is true is that one element of Cameron’s approach – which is to suggest a 10% cut in the budget for pay – is potentially too crude. Not all EU operatives are overpaid. Some of the lawyers, for example, have relatively modest salaries by private-sector standards. Rather than an across-the-board cut in pay it would be much more productive to start eliminating entire agencies, functions and perks. This would cut the payroll and the budget, while preserving the bits of the EU that actually do something useful. Here are some candidates for the chop. Read more
Hillary Clinton and Latvian foreign minister Edgars Rinkevics on June 28 (Ilmars Znotins / AFP/ GettyImages)
Visiting Latvia on Thursday, Hillary Clinton praised the Baltic state for taking “very difficult” austerity measures that would ensure a “stable, prosperous future”.
The US secretary of state is not the only high-profile figure praising Latvia’s economic record.
Christine Lagarde, the IMF managing director, dropped in this month and proclaimed its austerity programme an “inspiration” for heavily-indebted eurozone countries.
Latvia and its Baltic neighbours Estonia and Lithuania suffered the world’s steepest economic contractions in 2009 amid swingeing austerity measures. But now they find themselves in the frontline of the debate over austerity versus growth as the best way to tackle the eurozone’s debt problems. Read more
Welcome back to our live coverage of the eurozone crisis. By Tom Burgis and Kimiko de Freytas-Tamura on the newsdesk in London, with contributions from FT correspondents around the world. All times are GMT.
A summit in Brussels ended in deep division, with the UK refusing to back a new treaty for all 27 EU members and leaving the eurozone countries plus at least six others to forge ahead with a pact of their own to enshrine strict new rules on deficits and debt. It was meant to be the summit that would decisively chart a course out of the eurozone’s debt crisis.
19.03 That’s the end of our live coverage today. We’ll leave you with a quick summary of the day’s developments. See FT.com for more news and analysis through the evening.
- The European Union’s 27 leaders, minus David Cameron, struck a deal in the early hours to draw up a treaty by March that would bind them to strict new rules on debt and deficits, with automatic sanctions for countries that break them
- The UK courted isolation as it refused to sign up to a treaty for all 27 members after David Cameron’s early-hours pitch for safeguards to protect UK financial services met a chilly reception from his counterparts
- Markets were volatile before a tentative rally lifted equities in Europe and the US. The euro strengthened against the dollar but yields on Italian and Spanish bonds climbed once again
- The IMF welcomed the European deal, which included €200bn for the fund to ensure it has enough cash to deal with any more fallout from the eurozone crisis, with Christine Lagarde, its head, saying she was “hopeful that others will also do their part”