Portugal, the EU and the Euro – interview with João Ferreira (Part 1)

The European Union is in turmoil. Years of crisis and brutal austerity have had terrible social consequences, especially in peripheral countries. In Portugal a change of government after the 2015 legislative elections brought an end to the previous troika-imposed austerity and even a reversal of some policies. But structural problems persist due to the nature of the EU and its mechanisms, particularly the single currency. To discuss the political situation in Portugal, the consequences of entering the single market and the Euro, and solutions to these problems, as well as other issues such as the rise of the far-right in Europe, we have interviewed João Ferreira from the Portuguese Communist Party (PCP). He is a member of the PCP Central Committee, a city councilman in Lisbon and a two-time member of the European Parliament.

(First part of the interview. For the second part click here)


How would you describe the current Portuguese government? Is it a government of the left?

It is a government of the Socialist Party (PS). It is neither a government of the left nor a coalition of left-wing forces, as we sometimes hear. It is a government of the Socialist Party that carries with it the Socialist Party’s positions vis-a-vis the core issues of right-wing policy and its vision for the country, which are fundamentally different from those of the PCP. But it is a minority government, which with the current balance of power in Parliament means that the PCP plays an important role in the process of restoration of rights and raising incomes of the people that the government pledged to implement before taking power.

In fact, the developments since this government took office underline this. There has been a process of restoration of rights and increase of incomes in which the PCP and the mass struggles of recent years played a decisive role. However, there are still fundamental, structural problems that persist, whose solution require comprehensive policies in order to go beyond the recovery of rights and incomes and ultimately develop the country. This is precisely connected to the fact that this is a government of the Socialist Party which has inherited all the historical contradictions that the Socialist Party has not managed to resolve and which are in turn connected to the right-wing policies of the past 40 years. And this is why it is not a government of the left.


Let’s analyse these issues separately. What positive measures were agreed upon and implemented, and why was there such a nervous response or even outright opposition from Brussels?

The actions of the previous government, a right-wing coalition of the Social Democratic Party (PSD) and the Christian Democrats (CDS), had as a starting point the intervention program of the troika, composed of the International Monetary Fund (IMF), the European Central Bank (ECB) and the European Union (EU). This program was subscribed by PSD, PS and CDS, while the PCP rightly labelled it as a “pact of aggression” towards the country and the people.

And so this PSD-CDS government implemented policies which are essentially in line with the recent directives of the IMF and the EU: an onslaught against labour and social rights, privatisation of state companies and strategic sectors of the economy, destruction and dismantling of public services, in permanent conflict with the Portuguese Constitution. It was a government that diligently put in place all the orientations and impositions coming from the European Union. When this government was defeated in the 2015 legislative elections and conditions arose for a new government to take office, a minority PS government that had agreed to revert some of the measures implemented in the previous four years, the European Commission reacted immediately. The European authorities, the major European powers, big European capital and their political representatives, such as the European Commission, they all reacted immediately as they saw the path they had been advocating and imposing in jeopardy.


Communist Party demonstration against the “pact of aggression”


What has been done specifically? Even if they have a limited scope, some measures we consider to be important have been implemented. For example:

  • a reversal of the privatisation processes that were in course in the transportation sector,
  • the restoration of four public holidays that had been taken away by the previous government,
  • the restoration of the 35-hour week for the public sector,
  • the elimination of public sector salary cuts and of income tax surcharge, which means an increase in working class incomes,
  • an increase of the pension incomes, when the troika was recommending further cuts, this time with a permanent character, on top of the cuts put in place by the previous government,
  • an increase of the minimum wage, even though it is still way below the values we deem fair,
  • the restoration of collective bargaining for state enterprises,
  • an increase in family and child benefits, both in its amounts and the number of people covered,
  • the introduction of free schoolbooks for primary schools.


These are all measures that contradict the troika’s impositions. The troika, the EU and the big Portuguese capital saw this as a threat to the general policies they had pushed and reacted in a violent manner, with threats and pressure. This highlights how far the European Union has come. Even limited measures with a social character, of raising incomes, improving living standards, are enough to confront the EU, its power structure and the policies they have been imposed on the peoples. We are not talking of fundamental, structural measures, but ones with a very limited scope, but even these are enough to unleash the brutal reaction we witnessed.


You also mentioned the Socialist Party’s shortcomings, which stand in the way of a more comprehensive response to the country’s problems. Can you elaborate on them?

On one hand we have its submission to all policies and impositions from the European Union. While it is true that concrete measures that the EU recommended have been called into question, the main impositions that result from the Stability Pact, the Economic Governance packages, the European Semester, the Fiscal Compact, are all embraced and accepted by the Socialist Party. And we are talking about policies that have an inherent right-wing, neoliberal character. Similarly it also accepts the submission to the single currency, which we can get into in more detail later, with all that this has meant for the country in terms of the destruction of productive sectors and an overall increase in inequality.

But on the national sphere the Socialist Party has also historically been unavailable when it comes to confronting the dominant classes. For example, it cannot be counted on to reform the fiscal system in order to demand a greater contribution from big capital. Along the years a system has been put in place that is extremely favourable towards big capital, providing it with an extremely low tax burden, at the expense of the workers and small and medium-size enterprises. Now that we need wholesale changes to revert this situation the Socialist Party cannot be counted upon. Another example has to do with labour legislation and the fact that the Socialist Party has not done anything regarding the measures that are most punishing for workers. This shows that there are structural aspects of the right-wing policy that remain entrenched in the Socialist Party.


Staying with big capital, it seems like the banking sector remains front and centre, with constant fears and instability. What measures, according to the PCP, ought to be implemented in regard to the banking sector?

The PCP has identified three major constraints that the country is faced with:

  1. the submission to the Euro
  2. the colossal debt and debt service
  3. the dominance of private banking over the financial sector


The first two we will get to in a moment. In what concerns the third, we should recall that the banking sector was nationalised after the Revolution of 1974, and then there was a process of privatisation and reconstitution of the private banks. And the result of this process is what we have been watching in recent times. We have a banking sector that is not at the service of the country but which serves only a few economic and financial groups, some Portuguese, others foreign. These groups have along the years accumulated fabulous profits at the expense of families, small and medium-size enterprises, and the country in general. All this resorting to fraudulent and corruption schemes, unfettered speculation, conceding loans to friends and family, etc. From the PCP’s point of view this demonstrates the need of bringing back the banking sector under public control, reorienting it back to what should be its social function: holding savings and putting them at the service of productive investment, invigorating the economy and the country’s development, rather than putting these resources to use in the assortment of practices we listed before.


In Portugal we have heard a lot about the CGD and the Novo Banco (1)

The Novo Banco is a striking example of a bank that serves only the interests of a handful of capitalists, but it is hardly unique. It is an example that has a parallel in other banks which have been the origin of significant problems. In fact, the workers have been called more than once to cover the losses of private banks. What we argue is that, given the point we have reached, the state has to assume public control over the Novo Banco as a starting point towards a more generalised control over the banking sector.

Concerning the Caixa Geral de Depósitos, it has a fundamental problem. Even though it is the public bank, due to the choices of recent governments, it has been managed as if it were a private bank. So the same schemes of speculation, questionable loan practices, etc, have been practised, not to mention that it has also been called upon to plug holes in the private banks. Therefore the demand is not only to keep Caixa Geral de Depósitos in the public sphere but to have a management that effectively works to support the development of the country.


Let us now turn to the debt, which was of course the reason for the troika’s intervention. How did Portugal’s debt swell to these levels?

There are two types of causes: structural, fundamental causes, and others we can call more circumstantial. The first ones have to do with the process of destruction and progressive dismantling of the productive apparatus, of productive sectors such as agriculture, fishing, industry, and what this implied in terms of a bigger dependence upon foreign goods and services. Not only that, there was also a process of privatisations in the strategic sectors of the economy, which allowed capital, both national and foreign, to buy stakes in these sectors. This necessarily meant a drain of funds, since profits and dividends, instead of staying in the realm of the state, went to the pockets of shareholders.

Both aspects are inseparable from Portugal’s entry to the EEC, the single market, to compete without any protection against much stronger economies with much higher productivity levels. And the European structural funds, which were meant to alleviate the impacts of this unequal competition, never managed to do so, although some blame should lie with the governments in power at the time. But a large share of the structural funds came and left under the form of acquisition of goods and services, in some sense returning to their place of origin. Actually, the amounts transferred by the EU to Portugal are now surpassed by the amounts that leave the country as profits, dividends and interest towards other EU countries. That is, in a broad sense, Portugal is a net contributor in the European Union.

Evolution of Portuguese public debt in percentage of GDP (data from the Portuguese National Institute of Statistics)


The more circumstantial causes have to do with the speculative attack that the sovereign debts of the so-called peripheral countries withstood around 2009-11. An onslaught that is inseparable from the very rules that guide European institutions and the European Central Bank in particular. It is important to keep in mind that the ECB does not lend money to states, but it does so to private banks, and during a significant period we witnessed a situation in which the ECB granted loans to private banks, the so-called financial markets, with interest rates of 1%, and these banks turned around to charge interest rates from states that in the case of Portugal got to be as high as 7%. Until the start of the process of debt purchasing from the ECB, and this was postponed as much as possible, Portugal and other countries faced this speculative onslaught, with very significant differentials in interest rates that were responsible for a big increase in the public debt. And of course, the troika’s program made matters even worse.


Rewinding a little, in the 1980s the PCP was opposed to Portugal entering the single market. What were the reasons behind this position and what turned out to happen?

The Communist Party was essentially the only party in Portugal that conducted a thorough study of the consequences of a possible entry into the single market. We started even before the Revolution, when this possibility of entering the single market started being floated, we did it again in the 1980s when it was time to decide and the country did enter the EEC, and we did it once more 20, 30 years after said entry. And in general the warnings we sounded came to pass. The PCP was proven right. At the time we were an isolated voice, today there are multiple political and opinion sectors that recognise what we have been saying all along.

The EEC, today the EU, is a capitalist integration process. Integration processes are not neutral. Depending on their nature, they can work to benefit peoples, or to serve capital and multinational corporations. The EU/EEC, being a capitalist integration process, is by design meant to favour capital accumulation. In lieu of promoting convergence, we have social and economic divergence, and this is evident in the situation faced today by the peripheral countries, again in line with what the PCP predicted.

Demonstration in support of the nationalisation of the banking sector in 1975


There is another important point to highlight in the concrete case of Portugal. The big monopolist groups suffered major setbacks after the April Revolution and the achievements that followed. Just to recall some of them: nationalisation of the strategic sectors of the economy, agrarian reform, a Constitution that guarantees wide-ranging economic, social and cultural rights, among others. The accession into the EEC was seen by these groups as an opportunity to recoup lost power. Because the very criteria of accession into the EEC implied that the state was subjected to the so-called market economy, and so in Portugal this ended up boosting the process of capitalist recovery and the reconstitution of the monopolies that existed during the fascist dictatorship, which had been dismantled after the Revolution. The understanding of the instrumental character of entering the single market in terms of the return to power of the formerly dominant classes was also part of our analysis and a motivation for our opposition. And also here we were proven right.



(1) The Banco Espírito Santo (BES) was the crown jewel of the business empire of the powerful Espírito Santo family. In 2014 it required a multi-billion Euro bailout after it went bankrupt after years of dubious practices and complicity from regulators. A new bank, called “Novo Banco” was created, free of BES’s toxic assets. The PCP has argued that, given the tremendous cost it has had, the bank should not just be handed back into private hands.

The Caixa Geral de Depósitos (CGD) is Portugal’s largest and only public bank. The right-wing has had a long-standing dream of privatising it.


Cover photo: Mural at the Communist Party headquarters in Lisbon


Source: Investig’Action


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