Debts and consequences

The balance between possible aid, the “deaths” of companies and jobs, and the preparation for recovery will define the leaders.

The pandemic is leaving strong problems in the national social, economic and political spectrum. The governance strategy has been to maintain a precarious balance in companies and society, giving little, replacing acts with marketing and meddling in matters of a markedly private and business nature.

We have already written it here that paths are underway to nationalize the economy and standardize society within a Jacobin model. On the business side, the notion is that postponements and installment payments are short-lived panaceas, while some measures are postponed until next year so as not to penalize public accounts. And here we are in the usual drama: the bills will have to be paid by citizens and businesses, as the State has no time off.

There is no point in having optimistic illusions, as we will spend a few more months with great difficulties and the improvement in general conditions will depend on the recovery of the European economy. Nothing is watertight in sacrifice and abundance.

Analysts warn of the growing public debt that impedes investment and negative interest rates that limit savings and economic growth. Still at the recent London annual conference by the manager Schroders, chief economist Keith Wade warned of the continuation of low interest rates over the next three years, strong liquidity throughout the financial system, the slippage of the deficit in Western countries due to the Covid-19 and the exponential increase in European public debt, today at the level of the times of World War II.

Now, between us and when the OE for 2021 closes, we have a worsening of public accounts until October due to the effect of the pandemic of the order of 3.865 million euros, says the Budget DG, with the greatest emphasis on the expense of the lay-off and health-related expenses. And even until October, the deficit in the public accounts worsened by 8.179 million euros, according to the Ministry of Finance.

At the same time, there is less consumption and more savings with October generating another 500 million euros in deposits compared to September, says Banco de Portugal. And what will happen to the public deficit at the end of this year? It is expected to pass 7% of GDP and the weight of public debt can reach 140% of GDP. It is frightening data and figures that tell us that we are going to live in times of economic and social turbulence.

It will therefore be a fertile path for extremism and populism, and little care will be taken to manage the situation. The balance between possible aid, the “deaths” of companies and jobs, and the preparation for recovery will define the leaders. The Government has sent mixed signals, depriving it of credibility in the options and the OE 2021 is the “icing on the cake”.

The impossibility of transfers from the Resolution Fund to the balance of Novo Banco is the violation of a commitment to the investor. This contradiction is the responsibility of the largest opposition party (which can change its position in an amending budget) and the former contraption partner.

From the Government's side, absolutely absurd messages are sent, such as the end of tax aid for hybrid electrified vehicles plug-in. Now, if the objective is to reduce the level of harmful emissions, these models are the first phase of the project that is at stake, moreover, as it is difficult to reverse an industry that has already lost one third of sales.


The ECB and post-pandemic inflation

Christine Lagarde has issued a warning to governments and “hawks” within the ECB: the eventual rise in inflation, after the end of confinement, cannot serve to justify an anticipation of the withdrawal of monetary stimuli. If this scenario occurs, the ECB should make it clear that it is willing to tolerate a little inflation for some time without disturbing monetary stimuli. For Portugal and other more fragile countries, this clarification will be essential.

Who created Donald Ventura?

In the political battle, pointing the blame at the wrong opponent is dangerous, because the other competitor, the real culprit who plays dirty, comes out unscathed and ready to do more damage. It should not be necessary to explain this to some politicians.

Abuses of power

In the United States with Trump, in Portugal with two journalists. There are powers that need to be framed and others that need to be more courageous and less corporate.