Last week the Portuguese Prime-Minister made a statement to the country communicating the new austerity measures for the 2012/2013 period and informing that this new policies are consequence of a bigger deficit that was previously thought. This week it was the Portuguese Chancellor of the Exchequer who, on a television interview, explained the reasons and impacts of these policies. So what´s new for 2012/2013 and what are its effects?
The one measure that will affects all Portuguese by equal is the VAT alterations and because of that this measure it is the most unjust of all but unfortunately it is a necessary one.
The VAT increase on the catering sector will produce a competitiveness reduction on one of sectors that share the exportation effort. It is truth that it’s impossible to tax only the Portuguese and left out of the VAT increase the foreigners so there is no way to prevent this fall on the international competitiveness of the sector, however past this public deficit emergency it is urgent to review this measure to increase our competitiveness face our competitors.
Other VAT alteration it is the increase of the bottled water rate what it is a complete abuse without any fiscal justice because the water it is “the” essential commodity for human life. There is also the question that the bottled water, as the wine and olive oil for example, it is one of products that Portuguese consume almost exclusively national production and they have a higher exportation potential. For this reason this products should not have an elevate VAT rate.
One other measure that affects a large part of the Portuguese population it is the 30 minutes increased on the national daily labour time, what means a real remuneration cutback.
With the implementation of this measure the Portuguese euro exit defenders can stop talking about that because they already have implemented the effect of currency devaluation on Portugal to obtain competitiveness on international markets (see: One more apologist for a fall into the abysm1).
The big difference between this measure and a currency devaluation it is the transparency of its effects to the general citizens because everyone see the cut on their incomings.
But the true is that the increased of 30 minutes on the work day it is not a hard cost to pay and it is less penalizing than currency devaluation. Who is gone be real affected by this measure are the unemployed that will see their labour opportunities reduce even more.
However the most controversy measure it is the abolition of the holydays and Christmas subsidy to all civil servants with incomings above 1.000 Euros and a progressive cut to those with incomes between the 485 and the 1.000 Euros. But this measure will be addressed on a future commentary.
After all this measures it still missing the information about the cuts on the public budget based one more rationality on the public services management and what model of public services it will be implemented in the future but above all the Government do not show any intention to take the decision to renegotiate all the ruinous public-private partnerships and investigate who was responsible for those contracts.
And on the end of all it is essential that the State reduce as soon as possible the actual unsupportable tax burden to allow the privet economy to create the vital national wealthy required to the country development.
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