THE STATE OF THE EUROPEAN UNION

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THE STATE OF THE EUROPEAN UNION
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The social and political consequences
of the bailout
In respect to the aspects underestimated by the
IMF the consequences of the programme can
be summarised in three words: impoverishment,
inequality and emigration.
The impoverishment of Portuguese society,
attributable above all to unemployment, lower
wages and a lack of social protection, is clearly
reflected in the official statistics. The National
Statistics Institute’s annual living conditions and
income survey shows that the percentage of
people at risk of poverty rose from 18.1% in
2010 to 19.5% in 20133. The increase in the
risk of poverty affected all age groups, but espe-
cially those under the age of 18. For children, it
went from 22.3% in 2010, to 24.4% in 2012
and 25.6% in 2013. This impoverishment is
confirmed by the worsening of the material
deprivation indexes. In 2011, 20.9% of the res-
idents of Portugal were living in material depri-
vation and 8.3% in severe material deprivation.
By 2014, these levels had risen to 25.7% and
10.6%, respectively.
Unemployment is the major cause of impover-
ishment. In 2010, 36% of the unemployed were
at risk of poverty but this percentage rose to
40.3% in 2012 and 40.5% in 2013. However,
the situation of those in employment also deterio-
rated. The risk of poverty for the employed rose
from a rate of 10.3% in 2010 to 10.7% in 2013.
The “internal devaluation” inscribed in the
memorandum has been translated into an ef-
fective devaluation of work and the transfer of
3This indicator has a limitation in that it is sensitive to
changes in the median income. If we remove the median
variation effect, anchoring the indicator to 2009 values,
the increase in the percentage of people at risk of pover-
ty would be much higher: rising from 17.9% in 2009 to
25.9% in 2013.
the income from labour to capital. The meas-
ures cutting public sector salaries, which served
as a benchmark for the private sector, were the
precursors of a process that would affect all of
Portuguese society.
In April 2011, the average wage was
€962.90. By April 2014, average compensation
had fallen to €948.80. Despite the national
minimum wage being frozen at €485, the num-
ber of workers covered by the minimum wage
went up from 10.9% of all workers in April
2011 to around 15% in April 2014.
The devaluation of work, due to increased
unemployment, and changes in labour legisla-
tion designed to reduce “wage costs” for com-
panies led to a regressive distribution of huge
proportions4.
Between the second quarter of 2011 and
the third quarter of 2014 there was a noticeable
drop in income from wages (of €5.8 million, or
6.9%), accompanied by a significant increase in
income from capital (an increase of €3.5 mil-
lion, or 36%, in income from property and
€860 million, or 2.8%, in the gross operating
surplus of companies).
In spite of the increase in unemployment
and the fall in the value of wages, the pro-
gramme increased the restrictions on access to
and the value of social benefits. Since 2010,
even before the adjustment programme came
into force, mechanisms to assess the resources
of recipients became generalised, setting limits
above which support would not be given. The
mesh was even tighter in 2012, under the guid-
ance of the Troika.
4See Reis, José (coord.) (2014), A Economia Política do
Retrocesso: Crises, Causas e Objetivos (Regressive Economic
Policy: Crises, Causes and Objectives), Crises and Alterna-
tives Observatory, Almedina, Ch. 3.