Some ask whether the Socialist government has found a new way to run the economy, but it can take little creditby Paul Wallace / August 21, 2018 / Leave a comment
In the book turned film, Night Train to Lisbon, a worthy but worn-out Swiss classics schoolteacher gets a new lease of life in Portugal. Now the progressive-minded in Europe are gaining inspiration from the minority Socialist government that has been in power in Lisbon since late 2015. Peter Mandelson, an architect of New Labour’s “third way” between the extremes of right and left, recently praised Portugal for charting “a fourth way” for European social democrats.
Has the land of explorers really discovered a new nostrum for managing the economy and public finances? Something to replace the third way that died with the financial crisis a decade ago?
The idea that António Costa would now still be prime minister, let alone be lovebombed by centrist fellow-travellers, would have seemed preposterous in November 2015. His Socialist Party had come second in the inconclusive general election called by Pedro Passos Coelho, the centre right prime minister who presided over Portugal’s bailout between 2011 and 2014 (which was requested by José Sócrates, his Socialist predecessor). Unexpectedly, Costa managed to cobble together a minority government backed by the radical Left Bloc and the Communist Party. Even more unexpectedly, it has survived.
Just as surprising has been the government’s ability to run what appears to be a wildly contradictory set of economic and fiscal policies. On the one hand, Costa has undone reforms painfully pushed through by Passos Coelho as the price for releasing emergency loans from the Europe and the IMF. This has included crowd-pleasing measures such as restoring four public holidays, a rise in the minimum wage and a reversal of pay cuts in the state sector together with the reinstatement of a 35-hour working week (raised to 40 hours during the bailout) for most civil servants.