The untold story of Portugal
In the past few years I have heard a lot on international media about Portugal, Portuguese economy and life conditions. As a Portuguese person who has lived both in Portugal (where I currently live) and abroad I began to realize people abroad have very little idea of what’s really going on over here. So I decided to do my part to help and compile some information about our current situation.
Recent (as in Pre-Covid recent) articles have praised Portugal and its recovery from the 2010–2014 financial crisis, especially in comparison with its neighbouring countries. However, while raw GDP numbers might suggest a recovery, the general living standard has lowered not just comparing to the 2010–2014 crisis but most of Portugal’s post-EU history.
While wages haven’t raised much since 2014 (and are still lower than what they were in the early 00s), the cost of living has raised dramatically, especially when it comes to housing. Currently, the price for a 1-room flat in any big city is roughly the same as our minimum wage, Lisbon being the worst offender where the price sits around 150% of the minimum wage. Comparing to the rest of the EU, Portugal has the 2nd lowest purchasing power right after Greece and the highest rent price to salary ratio by a large margin.
Rent prices, however, are just one among many serious issues Portuguese people currently face. A minimum wage of 635€, just over half of Spain’s minimum wage, together with very high taxes, fuel and electricity costs, mean a general struggle to make ends even for an above-average wage worker if they’re not lucky enough to own their own house. In 2019 teachers assigned to some of the most expensive regions such as Lisbon and Algarve had to resort to living in tents since they could not afford a place to live (source in Portuguese).
Many of these issues are directly connected to the rampant corruption going on in Portugal. In 2018, a total of 11 ministers and secretaries of state were being judged over corruption (source in Portuguese) and last year a total of 15 ministers and secretaries of state of António Costa (current PM) had resigned over scandals such as corruption and fake credentials (source in Portuguese). Recently, “Operation Éter” has found as many as 74 cases of corruption, 59 of which being mayors and former mayors. In the past decade there have been multiple banks involved in corruption scandals being rescued by the government in a total of 14.6 billion (source in Portuguese), the most famous of which being BES (Banco Espirito Santo). The bank was found to be embezzling and laundering money causing nearly 12 billions in damage.
The owner, Ricardo Salgado, has not been jailed and simply had to pay a fine. He was removed as head of the bank but the bank did not cease to exist, it simply renamed itself as “Novo Banco” and continued business. Recently, the minister of finance Mário Centeno injected 1 more billion into Novo Banco, allegedly without the Prime Minister’s knowledge (source in Portuguese). He subsequently resigned over the scandal, only to be assigned as head of the Bank of Portugal.
This ongoing corruption has consistently stopped living conditions to become any better, as any surplus the national economy sees ends up funneled into the wrong hands. Despite Portugal increasing its tourism revenue significantly over the past few years, salaries have barely increased and taxes remain very high. If anything, the opposite has happened with the country’s revenue sources only contributing to an even higher cost of life. Tourism is the most obvious example, being tied to the costs of rents, however in the past few years the government has sold its stake in the national electricity and post companies to Chinese investors. Since then, electricity costs have become the third highest in Europe and people in less populated areas end up paying fines because post is only delivered every two weeks and bills arrive already after payment is due. Instead of reacting to these situations, last year the minister of workforce has publicly asked China to “use Portugal as guinea pigs to enter Europe”. (source in Portuguese)
Enter the Coronavirus
The COVID-19 pandemic has only made things worse than they already were. With the exception of rent prices having lowered in relation to what they previously were, life became even harder for Portuguese people. The public healthcare system which was already faulty and where people could already wait over a year for essential treatment or surgery, quickly spiralled out of control with scheduled surgeries being delayed in months or years. Despite the official number of COVID-19 deaths being 1.855 at the moment, an excess of 5.882 deaths have been reported in the first half of 2020 (source in Portuguese). It is unclear whether this is due to COVID-19 death numbers being inaccurate, a direct consequence of the healthcare system being unable to deal with the consequences or both.
However if the situation was tough, once again the Portuguese government managed to somehow make it much worse, especially on those most at risk. It has been decided that schools will reopen fully and teachers or employees who are risk patients, including those with diabetes or cancer, will not be allowed to work remotely. Furthermore, if they do fall ill (COVID-19 or otherwise) for over 30 days their salary will be reduced to 60%, however they will still be taxed on the full value of their salary. This is especially dangerous since Portugal’s cumulative tax is way higher than the OECD average. An elderly teacher who worked their whole life and earns 2000€ per month efectively earns around 1000€ after taxes and a 60% reduction of their salary would leave them with less than minimum wage after tax. For anyone in a big city this wouldn’t be enough to cover rent alone. I am referring to someone who earns 2000€ a month here, however the average wage in Portugal is around 900€ and the salaries of most teachers are much closer to that value, with less experienced teachers earning around minimum wage.
Portugal is currently approaching a second wave of COVID-19 with latest daily numbers being as high as they’ve been since May meaning the situation isn’t about to get any better. New contingency measures have been planned for September (in part due to schools reopening) including the limiting of gatherings to 10 people. However just before these were put into place, Portugal hosted a music festival with 33.000 people a day. While music festivals were forbidden this Summer, the “Avante” festival was classified as a political event since it is hosted by the Communist party (which was ruling in coalition with the current government until 2019) and therefore allowed.
The current scenario is uncertain. Experts warn the second wave will likely be heavier than the first wave, however with other countries already closing air traffic to and from Portugal and higher security measures than in the beginning of pandemic, it’s hard to predict for sure whether the worst can be avoided.
