The Dark Side of Portugal’s Economic Success Story

PERKS FOR FOREIGNERS
Portugal has tried since then to enhance its fiscal attractiveness as a stimulus to the real estate market. Since 2012, “golden visas”—five-year residence entitlements for non-EU foreigners who buy property in Portugal worth over €500,000—have brought in €4 billion. Non-habitual residency (NHR) status, which offers tax advantages, is available to EU pensioners who buy homes in Portugal.

“Another law, from 2014, regulating Airbnb-type rentals, lets property owners make €3,000 a month renting to tourists, compared to getting €300 from a Portuguese tenant,” said Luís Mendes, a member of Morar em Lisboa (Live in Lisbon), an umbrella organization of 40 housing rights groups. “In some parts of the city center, over half the apartments are on Airbnb. Housing-market deregulation means between one and three families are being evicted every day. Even the middle class have trouble finding somewhere to rent.” Lisbon has had a 3,000 percent increase in tourist rentals in a decade, and in 2018 overtook Barcelona and Paris as the European city with the largest number of Airbnbs per capita. Mendes said that “in four years the left-wing government has done very little about the raft of neoliberal measures that encourage the financialization of housing.”

Socialist António Costa came to power in November 2015 as leader of a government that promised to alleviate the troika’s austerity measures. With parliamentary support from the Left Bloc (Bloco de Esquerda, BE, far left), the Communists (PCP) and the Greens—the coalition is called the geringonça (the “contraption”)—the government attempted to stimulate purchasing power while trying to improve public finances. It increased the basic pension, the minimum wage (frozen at €485 until 2014 but now €600, paid 14 times a year) and basic social benefits.

This worked: In June 2017 Portugal left the EU’s “excessive deficit procedure,” which it had been in since 2009. The unemployment rate fell from 12 percent in 2015 to 6.3 percent in 2019, and the government estimates the public deficit will be close to zero in 2019 (compared to 4.4 percent of GDP in 2015), a first since Portugal became a democracy in 1974. GDP growth was 2.7 percent in 2017, a 17-year high.

The international press hailed a Portuguese economic miracle, and the left congratulated Costa’s unlikely coalition for turning its back on the neoliberal dogma of Brussels-imposed austerity. During the 2017 French presidential election campaign, the socialist candidate Benoît Hamon met Costa in Lisbon, and Jean-Luc Mélenchon of La France Insoumise (Unsubmissive France) cited the Portuguese model in promoting his manifesto.

This success also paid off in the EU election, despite a high abstention rate. The PS’s Duarte Cordeiro, the key figure in the government’s alliance with the far left, told me, “A few months before the parliamentary election in October, we won the [EU] election with 33.4 percent of the vote. We’ve now got nine Socialist MEPs [previously eight]. It’s a sign of the wide popular support for the current direction of the PS and the parties that support the government.”

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