A diplomatic victory

The year of 2005 ended very well for Portugal in the European arena. There are not many doubts left that the agreement achieved in Brussels in the early hours of the 17th December, concerning the next Financial Perspectives (2007-13), was good to our country.
The Portuguese negotiators obtained a very substantial volume of funds (22,5 billions of euros – a reduction of only 10% relatively to the previous financial framework) in a context of reduction of the communitarian budget and of enlargement of the Union (to countries which are creditors of communitarian funds and, consequently, direct rivals of Portugal on this subject). They also obtained more flexible rules for the execution of the funds, namely a plafond of 85% for communitarian participation (it used to be 80%), 3 years for the devolution of non-spent funds (it used to be 2), the inclusion of non-deductive VAT in the expenses financed by the Union, financing of the private component in public-private projects, etc.
It was, all around, a true diplomatic victory. Portugal and its “specifity” (meaning “Portugal and its problems”) had access to special rules created for new State-Members. A small detail is that the new State-Members entered in 2004 and not in 1986. And that is why this clear diplomatic victory crudely exposes the Portuguese failure, our slow transformation and convergence (that has turned into stagnation since the beginning of the 21st century). This victory solemnly declares our separation from Spain (when it comes to economic growth and development levels) and makes us put our eyes on Ireland with a mix of admiration and incredulity (though some people take note that poor Ireland, does not have any decent roads to cros the island; it is probably the same people who say that poor China, can only do simple things like t-shirts and toys.
Will the next Communitarian Framework be any different? In spite of the Government’s will, our curriculum does not seem to point to that. Portugal demonstrated that it knows how to reach very high levels when it comes to the execution of communitarian funds. However, it was not able to put them at the service of the transformation of the economic model and the country’s activities portfolio (that is, it does not associated the availability of the funds to the implementation of the reform of the Portuguese capitalist model), this results in a stagnation that drags on in time and causes, among other harms, difficulties at the level of public finances and increases in unemployment. However this failure also has good things: for example, an excellent and smiling diplomatic victory. Congratulations!

Are we attentive?

Although more evident nowadays, the Portuguese difficulties in the world economy are not from now. If we look at the 1990s (not to go any further) we will acknowledge that the need to alter the productive profile (and essentially the exporter profile) of Portugal (even then) was blatant. Even then Eastern European countries were affirming themselves as contestants whether in traditional sectors, intensive in labour and little demanding in qualifications (ex: clothing and footwear) or in sectors more scale and knowledge-based (ex: electronics and car industry). Even then these countries (Czech Republic, Poland, Slovenia, Slovakia, Hungary, Bulgaria, Romania) paid particular attention to Foreign Direct Investment (FDI) as a fundamental vehicle for growth, better productivity and for a structural transformation of the economy. Even then China was positioning itself as a great contestant not only in the previously referred traditional sectors but also in more knowledge-based activities (ex: electronics). Nowadays, it presents itself as a giant in almost all the activity sectors, from those based on cheap labour to those based on scale and technology. Even in the high technology, China has been giving clear signs of being an actor to be taken into count. Even then India affirmed itself as a great exporter not only in traditional sectors but also in services (of different technological levels, from call centres to the high technology services as the development of computer applications). Even then, the Spanish regions showed great dynamism in activities competing with those developed in Portugal and aligned themselves with the international movements of the FDI.
It is not enough to do better and more creatively than Portugal did traditionally. It is also essential to do new things, to attract and conceive new activities that create value, of greater productivity and more tuned in with the variations of international commerce. There is a new technologic wave emerging – with effects at the levels of investment and international commerce. Are we attentive?

Money: Wanted

In the European Union (EU), with the terrorist tension in turmoil, the difficulties in economic growth and the sensitivity of the questions related to immigration and border control increasing, the concept of Independent State has gained terrain to the idea of Member State ( “Member-State”, and therefore, co-responsible for group decisions and for the success of their implementation). Only this explains all the tension about the EU’s budget, that is, about 1% of EU’s product (a national budget is usually situated between 45 and 50%of the national product). With the reinforcement of the importance of nationality and the difficulties in growth and in job creation, the “old buddies” have started counting each euro. Looking at the “old” 15 (not counting with Luxembourg), I will briefly refer to a basic difference that, among others, structures the relationship between States in the EU: there are those that pay and those that receive, that is, some Members States are net contributors for the EU’s budget, while others benefit from the referred budget.

When they seat at the negotiation table, the difference between those who contribute for the thin budget of the EU and those who benefit from it over and over again is clear. If I give the money to someone, I can demand some conditions. If I receive the money, I can, in as much, be a “good student” (I can also be a “bad student” here and there as long as such behaviour does not turn into a rule on the eyes of those who pay me, running the risk of having my nice sponsor simply stopping the payments). It is because of this (but not only) that only the more uninformed thought that Germany could be fined for having a deficit of about 4% of the product. It will be enough, through the German perspective, having offered its national currency to be ran together with those gentlemen and ladies of the south Europe that deserve little trust and to having been, since always, (and by far) the biggest net contributor (in absolute values) to the communitarian budget. “Enough! The Second World War ended 50 years ago and we (Germans) have enough problems with our economy and our development model.” On the other side of the barricade we have “nuestros hermanos” who want to be big, to be in all the photos and to always have a word while, simultaneously, also wanting to continue to receive funds, because they are still poor, and cannot just suddenly enrich, in a purely statistical way. It is a schizophrenia that limits, for now, Spanish ambitions (in the EU; not in Portugal).

So, who is giving out the money, wanting to control its destiny? From Germany, the United Kingdom, France (not much, in relative terms), Netherlands (a lot, too much, taking into account its dimension), Sweden, Denmark and Italy (little). And for whom does the money go to, not wanting to irritate their financiers? It used to go to Ireland (that went from a “country of cohesion” to the second richest country of the EU in terms of per capita product – just after Luxembourg), it goes to Spain (the main beneficiary in absolute terms), to Greece (theold poorest member of the old poor members of the Union) and, of course, to Portugal (you guessed it: the current poorest member of the old poor countries of the Union; poorer than the two richest of the ten relatively poor countries in terms of the EU average that entered the club on the 1st May of 2004: Cyprus and Slovenia; and very soon poorer than two others: Malta and the Czech Republic).