Greetings to our guests and all those present in this Public Session in which we debate one of the main and most serious constraints to the development of the Country – the problem of the enormous Portuguese public debt and the resultant suffocating and paralyzing debt service.
This is problem we identified long ago, and for which we presented a solution, some time ago, on April 15th 2011, practically alone in the national party panorama. A solution that has evolved, because more and more Portuguese understand that this is a real problem that needs to be faced with a different determination, in the framework of a truly alternative policy, if we want to solve the deep problems of the Country, upon which weigh, among others, the aggravated degradation of the national production sector, an enormous deficit in production and employment, the low levels of public and private investment, a permanent drain of human resources, the increase in poverty and social inequalities, and an increasing dependence of the Country.
And if it is certain that in this new stage of the national political life, marked by the removal of the PSD/CDS government and the new correlation of forces in Parliament, has been making the achievement of some positive measures possible, the solution to the problems of development and sustained growth demands a new availability and initiative in facing the tasks for liberating the Country from the chains of submission and foreign limitation and that are, to a large extent, at the origin of the visible path of decline of the Country.
We know, and we ourselves have stated, that the solution to the deep problems of the Country is limited by options of the PS [Socialist Party] and its government, such as its unchanged policy regarding the liberation from the constraints resulting from the public debt, the submission to the Euro and domination of national life by monopolistic groups. But life is demonstrating, and will continue to show, that to effectively change the situation the Country requires a true rupture from the path followed so far by successive governments of PSD, CDS and PS.
Five years ago we publicly presented to the Country a proposal of renegotiating the public debt, with a reevaluation of the deadlines, the interest rates and the amounts payable, and an alternative policy to the intervention of the troika and its violent agenda of exploitation and impoverishment, which the then PS government, with the support of PSD and CDS, was preparing to summon.
Over all these years, we have never ceased to coherently propose and declare this brief formula, which was popularized and generalized: “the renegotiation of the debt in its deadlines, rates and amounts”.
The pertinence, justice and need to renegotiate the debt can be expeditiously recognized if we note that in the last five years, from 2011 to 2015, the State paid in interest 40.8 billion euros, the equivalent of 23% of the GDP in 2015. If we add what is predicted to be paid this year, an additional 8.5 billion, then the total nearly reaches 50 billion. To have an idea of the scale of this brutal amount, consider the 25 billion in structural funds that Portugal receives from the European Union, in the current EU framework of 2014-2020.
These are billions of euros lost annually and unavailable for public investment and social spending, for the promotion of economic growth and jobs, for fighting poverty and inequalities.
The Portuguese State cannot afford the luxury of spending every year, just in debt interest, almost as much or more than is spent on healthcare or the education of the Portuguese. On top of which, getting to the end of the year and realizing that the public debt remained practically the same.
This is throwing away money into an bottomless pit. There is no significant reduction of the debt, nor investment in the Country or its people. The debt has simply become a mechanism of extortion of the public and national resources, mainly from abroad, which is perpetuated, when not aggravated.
The workers, the population and the Country make sacrifices to pay an unpayable debt, the problem repeats itself year after year and who profits is those who speculated with the debt securities, like the banks and investment funds, or those who took advantage of the weaknesses of the Country, like the troika creditors.
And the Country doesn’t escape this absurdity: the debt is a tribute paid to international loan sharks for the strange privilege of keeping it as it is. Portugal does not solve any of its problems, on the contrary many of them are aggravated, with the maintenance and permanent extension of the usurious debt.
Several European Union countries have similar problems. Portugal has only advantages in promoting, at a European level, a concerted movement of negotiation of public and foreign debts, with the European Commission and the ECB, with the restructuring of the amounts and the payment conditions, that frees resources for productive investment, animates economic growth and confers reasonability and sustainability to the restructured debt.
But independently of this external action, the Country cannot remain idle.
Firstly one need understand that the debt is structurally unsustainable. Unsustainable, unpayable and unbearable. Socially and financially.
In certain contexts, like the present and as we stated earlier, namely of low interests rates and a massive monthly acquisition of debt securities from the banks by the ECB, the public and national debt may seem controlled, manageable, and even slightly overcome. The extension and reinforcement of the program of monetary expansion of ECB acts towards conserving low interests rates.
There are even those who have the illusion of returning to the situation, shattered by the international crisis in 2008, in which the euro countries, Portugal as well as Germany, have about the same cost in issuing debt. Or that prolonged low interest rates of new issuance of debt refinancing should substantially decrease the interest paid regarding the volume and value of the debt.
But this is not understanding that the European situation, and the national one more so, is hanging by a thread. That the country will not always count on this sort of “favorable alignment of the stars”, and in fact does not depend upon it. That whenever the interest rates increase, there is the risk of the debt increasing uncontrollably. That even if the interest rates remain low, the debt is so colossal that its service will continue to weigh upon and constrain the application of resources, the recovery, growth, the social action of the State, the public accounts, the reduction of the deficit and the debt itself.
The debt is comparable with incomes. This is how it works for a person, a company or a Country. The public or foreign debt is assessed in relation to the national income. If the product grows, the debt, in relative terms, decreases. It is essential for the Country to grow. For that one needs investment, particularly public investment. One needs resources, namely those wasted servicing the debt. The Country is at an impasse, the trap of debt. Growing only a little it cannot decrease the debt and the debt doesn’t allow the Country grow as it should.
The Portuguese public debt and foreign debt are, both of them, among the largest in the world. At the end of last year, the public debt (from the perspective of Maastricht) was 128.8% of GDP and the foreign debt (given the position of international investment) was 109.4%.
Since the net foreign debt of the Country is made up largely by the foreign component of the public debt, renegotiating the public debt is to simultaneously do the same regarding the foreign debt.
This debt renegotiation is a national imperative, to remove one of the most powerful obstacles, the deviation of resources to financial capital and abroad, resources that are necessary towards the development of the Country.
Renegotiation is an imperative and the reconsideration of the amounts payable, not only the deadlines and interest rates, an indispensable necessity. Smoothing the peaks of the next amortizations, the extension of deadlines, the decrease in interest rates, by themselves will not allow a satisfactory release of the resources committed towards the payment of the debt.
Therefore, PCP proposes a renegotiation of the State’s direct debt, including the troika’s loan, that strongly knocks down the amount of debt (at least in 50%) and that, together with the decrease of interest rates and deadline extension, ensures a substantial reduction (in at least 75%) of its annual burden.
Independently of subsequent evolutions, the successful experience of numerous restructuring of sovereign debts, from the situation in post-war Germany, to the experience of Argentina or Ecuador, demonstrates the possibility and viability of our Country also taking that route.
A renegotiation that begins with a profound audit of the dimension, origin, nature, creditors and foreseeable evolution of the State’s direct debt and that, well-grounded on this basis, resorts if necessary to the founded suspension of the payment of the State’s direct debt.
A renegotiation certainly implies a discussion with the creditors, but also a firm defense of the national interests. The General Assembly of the United Nations itself, on September 10th of last year, recognized this right of sovereign States, “which should not be frustrated or impeded by any abusive measures”.
But attacking the debt is not enough. It is necessary to attack the profound causes of the national indebtedness, so that it doesn’t repeat itself.
The abandonment of the productive sector, the lack of protection of the internal market, the privatizations, the financialization of the economy, the support and deviation of colossal public resources towards the banks, the favoring of big capital and financial speculation, the submission to the impositions of the European Union. And specially the membership of the euro, which contributed towards the degradation of the productive sector and replacement of national production by imports, which stimulates the indebtedness abroad and speculation with debt securities.
The Country did not “live above its possibilities”, it produced below its possibilities (and distributed the created wealth poorly). It is necessary to defend national production. It is necessary to produce more in order to owe less.
The banks stimulated the indebtedness inside our borders and entered into debt abroad. They were a prominent agent of the Country’s external indebtedness. When it found itself in difficulties it benefited from the aid of the State and liquidity from the Eurosystem. It is necessary to discipline and reorient the financial system. It is necessary to publicly control the banking system.
The Euro contributed much to the public and foreign debt of the Country, that began rising with membership or its preparation. We need a currency adjusted to the productive and exporting ability of the Country, that helps finance the economy instead of promoting austerity. It is necessary to recover monetary sovereignty.
It is essential that the Country, and the current government, not mislead itself with a false normality, of apparent stabilization of the debt volume, nor resign itself to this usurious and pillaging normality that entraps the Country and hinders growth.
Any strategy that refuses to touch the debt, namely in its amounts, with the justification that it will be gradually reduced with the contribution of the expansionist European monetary policy, is fooling itself and the country.
The interventions of the ECB can contribute towards reducing the interest rates, but are demonstrably more and more inefficient and, eventually, perverse. The money doesn’t reach the real economy, but is deviated towards speculation. The volatility of the mass flows of created liquidity retracts credit from companies. The negative interest rates affect the profitability of the banks and the supply of credit. The enormous indebtedness discourages investment, despite the low interest rates.
In addition to the worsening of the crisis, the Country is singularly unprotected, more than in 2008. The gigantic debt constrains the use of public spending, the null or negative short term European interests rates and the saturation of liquidity in the financial sphere rob the margin of progress of the monetary policies, as those advanced by the ECB.
In this regard, we know that there will be no lack of defenders of paralyzing inaction with their fallacious reasoning guaranteeing that the debt is sustainable, and also defenders of half solutions, that are no solution whatsoever, hiding behind dubious and misleading concepts, under the pretext of not frightening creditors, which can increase interest rates or lead the famous Canadian rating agency (DBRS) to declassify the rating of the Portuguese debt as trash.
But it is now, and not when it is too late, with the Country debilitated and with less negotiating power, that one must renegotiate the debt.
From our part we will not refrain from initiatives that advance towards this achievement, certain as well that the solution to the problem of the debt is also inseparable from achieving other axes of the patriotic and left-wing policy that we propose for the Country.
Sure that the Country is not condemned to economic and social decline nor to growing dependence and subjugation, we once again reaffirm that there are solutions for the national problems and that the path of economic and social regression can and must be interrupted by the convergent action of all democrats and patriots, giving strength to a true alternative project for the Country.
