Speech by Carlos Carvalhas, Member of the Central Committee, XXth Congresss of the PCP

On the public debt

On the public debt

Imagine an indebted country, under unrelenting pressure, oversight and blackmail from the European institutions; a country with no monetary or exchange rate policies, and with less and less budget policy; a country where a good part of all essential or strategic companies, as well as the financial system, are controlled from abroad. That country may be formally independent, but it has extremely limited sovereignty.

This is a key issue. The stranglehold of debt has been temporarily loosened with the European Central Bank’s policies of pumping liquidity into the financial system and setting low interest rates. But it is still a stranglehold, choking our economy with its interest rates continuously subject to speculation – as we have been witnessing. The markets – that is, banks, insurance companies, investment funds – take advantage of this to speculate, while the bill always ends up having to be paid by the usual victims. Having lost our monetary sovereignty we are now in the hands of the markets and dependent on the ECB – an unelected body that through the Canadian agency DBRS, that is in effect its conveyor belt, can decree that our debt is garbage and thus suspend financing to our financial system.

The European political arena and economic situation are at this time more favourable for Portugal, but we cannot forget that a Brazilian-style non-military coup had been scheduled for October 21 last, having even led Passos Coelho [PSD party leader and former prime minister 2011-2015] to state that he had always known that the PS government would fail but did not imagine that it would happen so soon. He was immediately followed by conceited statements by [his former finance minister] Maria Luís and by a chorus of right-wing commentators. This coup was aborted due to several factors – brexit, the deteriorating political and social situation in an EU having to cope with a refugee crisis and risking implosion in upcoming elections – that made it unwise to have one more crisis in a Southern country, and also because the budget deficit had improved. But the coup has not been set aside.

It lives on in its mentors’ minds, waiting for a difficult situation or some hitch to come up. The Portuguese experience is a bad example for them.
And for that reason too, it is essential to find solutions for Portugal’s public foreign debt, and to debunk some myths.

The debt did not arise because we “lived beyond our means”, or because of any so-called overspending. It is true that some money was badly spent, and that there were negative public investments due to electioneering, political cronyism, and favours to business conglomerates.

But what most weighed in, and still weighs, on the public debt’s rise was the speculation that it had to suffer thanks to the European Central Bank – who let speculation run wild without intervening, – thanks to irresponsible statements made by the finance ministers of Germany, the Netherlands and France, and thanks to the colossal flow of public resources into the banking system. As someone has already put it: Portuguese taxpayers at one point became involuntary shareholders in over 60% of Portugal’s banking! That is why there were cuts in salaries and in retirement and other pensions, why countless small and medium businesses were ruined, and why public investment was slashed. It was to save banks, that is, to save bankers and major shareholders, who in turn handed them over to foreign interests. The succession of spectacular banking scandals – whose bill we have been and are still paying, thus generating more debt – are also examples that debunk the myth about private management being better and also expose who actually benefits from it.
Furthermore, the fact is that the culprits are either “too rich” or “too PSD” to be jailed. [the expressions “too rich” and “too PSD” are in English in the original; PSD is a right-wing political party]

And on top of it all we are still being told, with an angelical face, that the nationality of those who control banking is not important at all.

Suffice it to look at the many millions that are being funnelled abroad every year as profits or dividends.

Between 1996 and July of this year, the total outflow in profits, dividends and interest exceeds by 82,000,000,000[euros] the total net fundings that have come in from the EU – this shows that those who said at the time that the then-EEC was “giving us a sausage now to later take a whole pig” were absolutely right! . Portugal is currently spending about 8,000,000,000 euros per year on interest payments alone – the same amount allocated to Health Care in the national Budget.

Many people don’t even imagine that, were it not for interest payments, the Budget would be running a surplus. This surplus was over 350 million in 2015, it will be ten times that amount in 2016, and a surplus of 5,000,000,000 is estimated for 2017!

Just imagine what these funds could do, in health care, education, scientific research, and in improving the living conditions of Portugal’s people.

The debt is a core issue. Let the socialists harbour no illusions, We need to move to a new level of demands, and of negotiation in the EU.

In the very early days of this crisis and speculation, the PCP was already responsibly standing for debt restructuring to be placed on the EU agenda – without arrogance, but firmly.

We were told by the PSD’s luminaries that that was not the right time, that we needed to show the markets and creditors that we were determined to pay back, because that would make it easier to later get a debt restructuring. But what happened is what we all saw, and are still seeing. It is interesting to note that even the IMF in a recent report criticised the troika for never having considered debt restructuring. Implicit in this, is that restructuring should have been negotiated immediately, since it was a prerequisite for development policies.

We have also been scolded for stating that the debt is unpayable. To those scolders, and as a tribute, I will reply with this quote: “They should blame Pythagoras, Euclid, Archimedes, Pascal or Lobachevsky, or any ancient, modern, or contemporary mathematician they prefer. It is mathematics and mathematicians’ theories that prove that the debt is unpayable” – Fidel’s humorous words at the meeting on Latin America’s debt. But just renegotiating the debt is not enough.

We must also address the factors and causes that originated it. Among them stands the Euro: a permanent factor causing loss of competitiveness and external imbalance.

Ever since the Euro came into circulation (2002) Portugal’s average growth has been practically nil, and it has been a brake to greater expansion of exports, with a negative impact on the balance of payments.

How many more years will be needed for the relevant conclusions to be drawn? A fresh burst of crisis in the capitalist system, or a deteriorating EU situation, may trigger unexpected outcomes. So, as we have said before, it is urgent to prepare Portugal for them, first of all by transitioning all the various foreign debt contracts to Portuguese law, so that the debt can then be paid in national currency and not in euros.

Lastly, let us highlight the key issue: increasing and enhancing domestic production. This requires a well thought out investment effort, and getting Portugal to walk on its own legs: by exporting and expanding the foreign market.

Let there be no illusions about a positive policy of austerity-reversing measures and an expansionist Keynesian policy being by themselves capable of solving problems. They will not, unless the debt issue and the imbalances caused by the Euro are confronted head-on.

Illusions are very expensive. It won’t be of any great comfort if they come to us later to tell us that the PCP was right after all.

There are some who are questioning or indignant at the fact that the PCP has made the [current] government feasible while it is at the same time fostering and supporting working people’s struggles for their justified demands.

The PCP knows that it is by winning over minds, by broadening unity, by honestly and openly debating with the government, by making the best use of its participation in parliament and other institutions, and above all the PCP knows that – much as this may displease the supporters of class conciliation or of verbal radicalism – it is through committed mass struggle that the nation can be extracted from the quagmire of debt and from the disastrous plight into which it has been led, that development can be fostered and that Portugal’s sovereignty and independence can be reinstated.

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  • XX Congresso do PCP
  • Economia e Aparelho Produtivo
  • Central
  • public debt
XX Congresso do PCP

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