In and against the European Union?

The Portuguese experience of an anti-austerity government in the EU, and its relevance to the UK

Hilary Wainwright

The government of the Portuguese Socialist Party supported and pressured by an alliance with the Communist Party and the Left Bloc have shown that it is possible to implement an effective anti-austerity programme as a member of the EU. This entailed successfully standing up to EU negotiators and facing down their repeated opposition to the government’s measures, leading to tough but ultimately successful negotiations. The result was a reversal of all the austerity measures introduced under the supervision of the Troika by the previous conservative government, while remaining within the EU’s 3% deficit limit.

From the Portuguese standpoint, the success of these negotiations depended on a favourable balance of power reinforcing the government’s bargaining position. This in turn was a product of strong civic resistance to austerity towards the end of the previous government; parties to the left of the Socialist Party (PS) yet in alliance with it, having the autonomy to campaign openly for a strong stand against EU pressure and a background of judgements by the Constitutional Court against several of the previous government’s austerity policies as infringing citizens rights to social justice.

The notably democratic constitution – drawn up in 1976, in the aftermath of the popular overthrow of the dictatorship in 1974 – contributed to the favourable balance of power in two ways. First by allowing for a plurality of parties that could ally with the government (e.g. on anti-austerity measures) while at the same time having the autonomy to express distinct long term goals ( for example, opposition to the neoliberal principles embedded in EU treaties).

The anti-austerity measures had a multiplier effect on consumer confidence and expectations, increasing demand and leading to trade union militancy, further increasing demand and benefiting the growth of the economy.

The experience indicates the possibilities for national negotiations for individual policies which effectively work in contrary direction to the neoliberal principles of the Maastricht and Lisbon Treaties of the EU (Greece is a discredited model even in some EU circles).

Moreover it also opens up the possibility of a longer term strategy aimed at changing the EU treaties themselves by creating a critical mass of national governments acting, as Portugal has, to negotiate minimal protections against austerity within EU rules, and to act in solidarity to change them.

Given the almost clean sweep of neoliberal – and now far-right governments – across Europe these opportunities could be some way off, but there are reasons to be optimistic. Spain, for example, has moved in the same direction as Portugal. Portugal’s experience presents a concrete alternative for governments across the EU, notably the UK, under a Jeremy Corbyn led government to both remain and reform.

Portuguese Prime Minister António Costa debated the future of Europe with MEPs Photo credit: Flickr/”© European Union 2018 – European Parliament/CC BY-NC-ND 2.0

Faced with the choice in Britain between a free-market, xenophobic Brexit and a neoliberal, exclusionary EU, it is useful to learn from the experience of a government that has succeeded in challenging neoliberal austerity from within the EU. In Portugal, just such a government is coming to the end of its four-year term.

I went to investigate as the parties that lead or ally with this government are assessing the experience themselves and preparing their electoral programmes for the October elections. The experience brings useful empirical evidence to bear in favour of an alternative to the simplistic choice between Brexit or an unquestioning acceptance of the treaties of the EU, as we prepare for the possibility that the British public will have a final say in a further public vote on the issue.

The experience of the Socialist Party (PS) minority government in Portugal – reversing the Troika imposed cuts in salaries, services and social security through an alliance with parties to its left – is an interesting experience in itself. It is exceptional in several ways.

For a start, it is a minority government, led by a social democratic party, which, rather than ally with the centre right as its sister parties have to their cost in the recent past, allied with the Communist Party (PCP, an orthodox Communist Party and leading force in the overthrow of the Salazar dictatorship) and the dynamic and growing party of the radical left, Bloco Esquerda (BE – at first a convergence of Maoist and Trotskyist groups, it has attracted social movement activists and radical intellectuals ever since its formation in 1999).

The PS government broke with convention through a combination of shrewd and risk-taking diplomacy (a widely respected capacity of PS leader Antonio Costa) and the defeat of EU institutions whenever they tried to block the government’s anti-austerity measures.

The EU was not in a strong position to impose its policies; it did not want another Greece or, after 2016, another destabilising equivalent of Brexit. But most important was the balance of power nationally, in Portugal, due to the strength of the BE and the PCP, the PS’s new allies, with their adamant insistence and public campaigns for the terms of the agreement to be met. Their strength and their resilient politics made it impossible for the PS government to concede to the EU and stay in office.

A collapse of the PS-led alliance of the left would have driven the PS into the hands of the right – a fate considered to be political death by PS leaders who looked across at the collapse of their sister party Pasok in Greece after it allied with the centre right.

The spectre of Pasokification (in Portuguese, ‘Pasokificao’ – a term that recurred frequently in conversation with PS MPs, ministers and activists) haunted the PS, as it did most social democratic parties in Europe after Pasok’s vote plummeted from 43.9% in 2009 to 6.3% of the vote in September 2015. Propping up a right wing coalition as it pursued the policies of the Troika in Portugal would have doomed the PS to joining Pasok in the family grave of European social democracy.

November 2011 Austerity Protest in Lisbon, Portugal. Photo credit: E10ddie/CC BY-SA 3.0

The Portuguese experience was exceptional too in the pragmatic, popular and confidence-raising anti-austerity programme of this ‘geringonca’ (the ‘contraption’, as this surprise left alliance was pejoratively termed). Neither the right nor EU officials believed it could last – and indeed, through the EU, the parties of the right tried, unsuccessfully, to ensure that it would not.

Here was the one-time party of Mario Soares, the PS leader who pushed Portugal’s integration into the EU and NATO, now in alliance with two parties implacably opposed to the EU because of the neoliberal austerity rules entrenched in its framing treaties. The commentariat too believed it would collapse within a year and the PS would have to turn to the right wing, confusingly named Party of Social Democracy (PSD – after the ’74 revolution no one wanted a name that associated them with the right), and continue the Troika-imposed austerity programme of the previous four years.

On several issues, for example the increase in the minimum wage and the security of precarious workers, Bloco, and on most occasions the PCP, made it clear that they would withdraw their support for the government if the agreement was not honoured.

A further factor that explains the innovative Portuguese experience was the legacy of the ’74 revolution in the country’s distinctively democratic parliamentary institutions. True, many of the more radically socialist features of the ’74 revolution – driven by the mainly Communist-led peasant occupations of the private latifundi in the Alentejo and other agricultural areas and the workers’ occupations of the shipyards and other major workplaces – were defeated by the moderate and anti-Communist forces (in which the PS led by Mario Soares played a leading role).

However, the radically democratic and egalitarian impetus of this thoroughgoing destruction of authoritarian rule had a lasting institutional impact: the pervasive democratic force of the Portuguese revolution, along with its origins in the military, allowed none of the conservative continuities typical of the aftermath of Franco’s Spain.

Two features of Portuguese democracy stand out as conditions for Portugal’s ability as a member of the EU to refuse the bloc’s attempts to continue to impose its neoliberal rules against the will of Portuguese citizens, as it succeeded in doing against the democratic will of the Greeks. The first was the nature of its post-revolutionary constitution, drawn up in 1976, with its core of social and economic rights and its generally vigilant Constitutional Court.

On several occasions, in 2013 and 2014, the Constitutional Court intervened against austerity measures agreed by the legislature under pressure from the Troika. Jorge Sampao, Clerk to the Constitutional Court from 2014, remembers “a measure to make it easier to fire public servants. The court ruled this measure unconstitutional because it violated the legitimate expectations of the public servants.” It also ruled measures to cut the salaries of public servants to be unconstitutional.

These interventions by the Constitutional Court had repercussions in society, stimulating a sense of hope against a fatalism based on the pervasive narrative that there was no alternative to austerity and that austerity was a justified punishment for Portuguese people living beyond their means.

The growing collective resistance from 2013 – with huge demonstrations peaking at 1 million out of a population of just 10 million – no doubt gained some legitimacy from the court’s cautious vigilance. Sampao gives anecdotal evidence of the Court’s popularity: “It was funny, I even remember a picture of a girl wearing a T-shirt saying ‘I Love the Constitutional Court’. Imagine buying a T-shirt putting a love heart before ‘Constitutional Court’!”

The other feature of Portugal’s parliamentary institutions that enabled its exceptional anti-austerity alliance, is their unusual openness. One aspect of this is a proportional electoral system without the threshold system that often limits parliamentary representation for small parties.

This has allowed political parties to build up or maintain a presence in parliament and the platform this provides, however small or fluctuating their percentage of the vote. Thus Bloco has been able to grow fairly steadily from 2.4% in 1999 to 10.2% in 2015 (from two seats out of 230 to 19 seats). The PCP, a party with stable support in the main industrial areas and rural areas, has maintained its position of a semi-permanent and warily respected part of the political scene – at around 8%-9% since the early 1990s (8.8% in 1991, 17 seats, 7.9% in 2009, 16 seats, and 8.3% in 2015, 17 seats).

The proportional electoral system facilitated the alliance of the left and the possibility of being ‘in and against’ the EU, because parties could maintain their autonomy from the government and exert their right to campaign for long-term goals of radical structural change (hence, against the fundamental treaties of the EU), while at the same time negotiating measures (engaging in the institutions of the EU) that would reverse the policies of the Troika and the former right wing coalition government ‘Portugal Ahead’. This meant lifting out of poverty the two and a half million people living below the poverty line under the Troika; reversing the high unemployment levels (youth unemployment reached 41%); and restoring labour rights destroyed under the Troika.

This also had the consequence of stimulating hope and confidence in the possibilities of change and generating expectations and sometimes demands for change that went beyond the limits of the agreement. In other words, it is a proportional electoral system that enables parties to work simultaneously and openly at different levels, expressing the complexity and hybridity of major political issues, such as a European nation’s relation to the EU, way more accurately than the UK’s essentially two-party system.

These then are the distinctive features of Portugal’s four year experience of being ‘in and against’ the EU. This is the chronology of what happened, and what many hope will happen after October’s elections.

Marcha e Comício em Lisboa. Photo credit: Flickr/Bloco/CC BY-NC-ND 2.0

At the 2015 elections, the right wing coalition, ‘Portugal Ahead’, won the largest number of votes of any party but not enough to get its budget through parliament and to govern. The Socialist Party on the other hand, which had won 30% of the vote on a moderate ‘austerity-lite’ election campaign, could only put together an alternative government if it made an alliance with the two parties, the PCP and Bloco, that had increased their vote to a total of 20% with strongly anti-austerity election campaigns.

The PS’s newly elected leader Antonio Costa had just replaced Jose Socrates, who not only signed the original 2011 deal with the Troika, in true Pasok style, but had recently been arrested for corruption and was awaiting trial. Costa, whose father was a PCP activist, had worked in alliance with the PCP as mayor of Lisbon. Though to the left of Socrates, Costa’s own politics were and are moderate, by all accounts, and certainly involve a commitment to working within the rules of the EU.

Interestingly, Catarina Martins, the current leader of Bloco, describes him as “a brave man, willing to take risks” and “a skilled and tough negotiator”. The risk he took to avoid the fate of Pasok, to respond to the anti-austerity clamour of the voters, and to become Socialist Party prime minister, was to take up the conditional offer of support from left wing parties who opposed the EU, initially a public offer from Martins. Bloco and the PS negotiated an agreement, reversing the Troika-imposed austerity measures of the previous government.

The Communist Party carried out its own negotiations with the PS, along similar lines – the two negotiations were separate at the PCP’s insistence. The conditions agreed through these processes included the raising of the minimum wage by 20% by January 2019; pensions unfrozen (at the rate of inflation) and lower ones augmented every year by 3 to 4%; collective bargaining for public servants re-established; the extraordinary tax imposed on wages and pensions under the Troika be abolished; the programme for sacking public servants be ended; taxes on labour income be reduced and the tax on large firms be increased; the privatisations carried through by the right wing government (the airline and public transport in Porto and Lisbon) be reversed and new privatisations be forbidden.

When, on this basis, Costa took office, he did so against the wishes of the EU. In fact, the European Commission was considering imposing sanctions on the new government, at the instigation of Manfred Weber, leader of the centre right coalition in the European Parliament. Costa’s minister of European affairs at the time was Margarida Marques, herself an ex-employee of the European Commission. She was involved in the negotiations with the EU.

Looking back, she comments: “It was clear that the position from the European Commission was too ideological. They believed, ideologically, that austerity was the best way to answer the crisis.” She went on: “eventually, as our measures against austerity proved successful – helped by an improvement in the international situation – we showed it was possible not to have an austerity policy and yet to be within the EU 3% deficit rule. At the end of the day, however, it was not the content of our policies that mattered to them, it was the agreements with the Communist Party and the left wing. They were thinking of Syriza and tried to treat Portugal as the new Greece.”

The European crisis in the light of Greece. Photo credit: Flickr/ Bloco/CC BY-NC-ND 2.0

The blow-back from Greece was already beginning to weaken the legitimacy of the EU’s ideological mission and, in the judgement of Marques, Portugal pushed the Commission to be more flexible.

One of the architects of the government’s economic strategy for doing so, economics professor Francisca Guedes de Oliveira, explains: “Our main goal was to come up with a policy plan that reduced poverty and inequality, increased income redistribution and growth and improved the health of the Portuguese economy, within the framework of Europe.” The negotiations with the PCP and BE had an impact on the plan, she explained: “The left wanted the improvements to be done quicker, and they pressed strongly on restoring spending on health and education.

Actually,” she added, “I think it worked: one of the things that politicians forget is the importance of expectations. Under the brutal measures imposed by the Troika, people were so scared that they cut back massively on consumption, which worsened the economic situation, even if the deficit was being cut. Now that these measures are being reversed, there is an optimism about the future and people are consuming and their expectations are growing.”

Increased expectations and growing confidence also highlight the unfinished business of the agreement. There are increased levels of popular organisation and militancy. A priority, passionately argued for by Bloco activists, PCP supporters and PS representatives alike, is investment in the health service.

Pressure from Bloco and the PCP meant that there was considerable investment in the National Health Service (Servico Nacional de Saude, SNS), reversing the cuts of the Troika, but it was not sufficient. Today, the result is that though the salaries of health professionals have been restored, there is in the words of Bruno Maia, a doctor and Bloco member, “a lot of degradation in the infrastructure and services themselves”. “As a result,” he reports, “we are losing doctors to the private sector; emergency departments are completely packed, with growing waiting times and waiting lists for surgeries are growing.

It’s becoming unbearable.” Dr Maia assumes that investment in the public health service will be a priority in his party’s electoral programme: “That’s for sure,” he says, going on to ask, “What will happen after the election? We don’t know. If the agreement has to be made again – and all the polls indicate that the Socialist Party will need the left parties to govern – we will not have a choice. We will simply have to address the insufficient investment in the health system. We will have to do it.”

Domingos Lopez, a long-standing supporter of the PCP and secretary to the PCP’s historic leader Alvaro Cunhal when Cunhal was briefly a minister after the ’74 revolution, agrees that defence of the health service is the number one issue on which any further agreement must be stronger. “Our biggest achievement after the revolution was the Servico Nacional. With private health increasing, one of the key tasks is to defend the national health system. Of course we will make it an election issue.”

Government ministers tend to be defensive over public investment, and Bloco MPs recognise that they did invest a billion euro in the health service: “There were no cuts; they did invest,” says Ze Soeiro, BE’s spokesman on labour issues, “it just wasn’t enough.” PS ministers, like Costa’s Secretary of State, Mariana Vieira Da Silva, are proud of how their strategy for increasing wages and pensions has worked, not only to relieve hardship but “we have grown the economy; and reduced the deficit,” she says, adding: “Our finance minister Marcelo Centano is talked about in Europe as ‘the Ronaldo of public finances’, the deficit is so low.” (It is now 0.7%, compared to 3.2% when the Troika was  insisting on austerity as the only way to reduce the deficit.)

The problem now for Centano, however, is that raised expectations and popular self-confidence means that people know that there is public money available which could be spent on public services. His policy of using this money to reduce the deficit is now openly challenged. The finance minister can no longer hoard public funds to suit his and the EU finance ministers’ narrow definition of ‘sound public finances’.

As I visited Portugal, teachers were taking sporadic strike action to win a full restoration of their careers, and therefore salaries which had been  cut short by the austerity government. I spoke to one of their organisers in Porto, Henrique Borges, as he prepared for a massive national demonstration in Lisbon the following weekend. “The government says there is no money but we know there is,” he said. “The deficit is very low and they are giving money to private banks. So there’s money for public services.” Bloco and the PCP both support the teachers, and the union gains a sense of power from the leverage this gives them over the government.

It’s clear that the character of the next agreement, the next ‘geringonca’, if election results make it necessary, will be shaped not simply by electoral arithmetic but by wider social pressures, stimulated both by the expectations raised by the agreement and by the fact that it has created new channels through which social and labour movements can have influence over political power.

Inconformação 2019. Photo credit: Paula Nunes / Bloco de Esquerda/CC BY-NC-ND 2.0

A further illustration of this relationship between change through the political institutions and pressure for more from social movements,  addresses the precarisation of labour, one of the few structural questions over which the agreement has been able to achieve change and open up dynamics of further change. It is a global trend but as a semi-peripheral country with a large informal sector and a weak productive structure, Portuguese people lived precarisation in a particularly harsh way.

A movement of precarious workers began to grow from 2002, reinforced by international networks of an increasingly self-conscious and creatively militant ‘precariat’. In Portugal, this awareness among precarious workers of themselves as a collective actor grew in the later years of the Troika, as they both created their own spaces of self-organisation and developed close collaboration with trade unions and other social movements as part of the ‘Screw the Troika’ movement of 2013. Even before the fall of the austerity government, all  this activity generated a ‘Citizens’ Initiative’ (another feature of Portugal’s radically democratic constitution) for a new law to require contracts that would end precarious work. Under the PS minority government, an important measure in the agreement was to end precarious work in the public sector. The implementation of this was no simple matter of legislation and central state administration: successful implementation required the inside knowledge of precarious workers themselves. It was an exemplary process of collaboration between parliamentary and societal action, self-organisation and a sharing of practical and official knowledge – a part of the notably favourable balance of power that enabled the PS government to succeed in its anti-austerity negotiations and struggle with the EU.

A favourable balance of power at a national level can only achieve change in limited spheres, however. For change in central structural issues like the financial system, this national shift would need to be combined with a shift in the balance of power in Europe, to achieve changes in the rules of institutions such as the European Central Bank.

Left politicians in Portugal are aware of the limits of their power vis a vis the EU as representatives of a small country, if they lack more powerful allies. The fall of the right wing government in Spain is seen as a move in a more favourable direction. Ana Gomes, a senior PS MEP, is enthusiastic about the possibility of a Corbyn-led UK government contributing to left projects of change in Europe: “It would make a dramatic impact, pulling the EU to the left.

The dilemma is that there isn’t a French Socialist Party; in Italy you have the fascists in power. Germany is always on the fence and the SDP is going down in the polls since they’ve been badly hurt through participating in the Grosse Koalition.” Costa’s Secretary of State reiterates these hopes more cautiously: “I must say it would make a big difference if the decision was to remain and stay in Europe to change it from within.”

2nd March Anti-troika demonstration: “I’ve a dream: I want to be happy in Portugal” Photo credit: Flickr/Pedro Ribeiro Simões/CC BY 2.0

‘Lisbon’ could be said to symbolise the contradictions of the EU: the rules on the one hand embedded in treaties, and on the other hand, the institutions and daily decision-making through which they are implemented, dependent on power relations between different actors and mentalities through which problems are perceived. The Lisbon Treaty, named after the city in which it was signed,  represents the neoliberal rules which, dogmatically interpreted, mean austerity, absolute constraints on social measures and/or the punitive rule of the Troika.

It is the level at which when the right and centre right are in office across Europe, so the power of the European Roundtable of Industrialists, the corporate lobby, is dominant. On the other hand, the experience of the recent ‘Lisbon agreement’ negotiated by the PS to reach office, points to a possible flexibility – not because of a Damascene change of mind but because the balance of power between EU institutions and the unaccountable pressures of corporations and the normally subservient acquiescence of the nation state is challenged.

It remains to be seen whether the new balance of power after Portugal’s October  elections, both electorally and in terms of civil society’s willingness to mobilise, enables Portugal to go further than its defensive reversal of the Troika’s brutal measures and advance the structural ability of the Portuguese state to meet the needs of its citizens.

But in its success in reversing austerity, it is surely an experience from which Labour can learn. Jeremy Corbyn declared at the Durham Miners Gala his belief in an “anti-austerity Europe”. Portugal’s experience indicates that the way to achieve this is not by breaking from Europe, and allies like Antonio Costa, but working alongside the Portuguese Socialist Party and other allies on the left across Europe  to maximise  the balance of power to gain the social and economic benefits of being ‘in and against’ the EU.

With many thanks to Alvarao Vasconcelos, Pedro Bacelar and Catarina Principe and to the Rosa Luxemburg Foundation and the Transnational  institute. 

This article  was published in cooperation with the London School of Economics and Political Science (LSE), Another Europe is Possible and the Rosa Luxemburg Foundation.

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À propos des auteurs

Hilary Wainwright is a leading researcher and writer on the emergence of new forms of democratic accountability within parties, movements and the state. She is the driving force and editor behind Red Pepper, a popular British new left magazine, and has documented countless examples of resurgent democratic movements from Brazil to Britain and the lessons they provide for progressive politics. Her latest writings include, A New Politics from the Left and ‘Forging a “Social Knowledge Economy”: Transformative Collaborations between Radical Left Governments, State Workers, and Solidarity Economies’ in the book: From the Streets to the State: Changing the World by Taking Power.