How austerity and the financial sector broke Portugal

It did everything the fiscal hawks wanted – and still had to ask for a bailout.

After many agonising weeks and months, Portugal has become the latest country to concede defeat to the financial markets and request an EU/IMF emergency loan. Despite ostensibly doing as the markets told them and passing three austerity budgets, the Portuguese continued to have their credit rating cut. The cost of borrowing is now so high that they were left with little alternative.

Portugal's tragedy is that its government did what it was told and still got punished. It slashed public spending, wages and pensions to appease the financial markets and the austerity hawks who dominate European politics. Furthermore, the need for a bailout became inevitable when the minority Socialist government was brought down by the refusal of the conservative and other minor parties to support its latest austerity budget.

Portuguese conservatives have since taken to the airwaves to decry the failure of the Socialist government, conveniently ignoring the fact that an EU/IMF bailout will impose far more stringent cuts and a high interest rate on any loan it grants. This disgracefully cowardly move by the EU Commission president José Manuel Barosso's own party deserves to bring punishment for the party by the Portuguese electorate when elections are held, presumably after the bailout is finally agreed.

With characteristic bravado, George Osborne used Portugal's misery as proof the Britain would be in similar danger if his austerity plans were not followed. The sheer dishonesty of this has already been exposed by the likes of George Eaton and Will Straw.

The strength of UK government bonds is envied the world over. While Portugal was struggling to get even six-month loans at below 5 per cent interest rates, Britain is charged around 3.4 per cent on bonds that mature every 14 years.

In fact, however, the case of Portugal shows that austerity simply is not working. On the BBC's Question Time on 7 April, the Culture Secretary, Jeremy Hunt, and the Lib Dem MP Jo Swinson trotted out the coalition line that the coalition's front-loaded spending cuts are the only way to cut the Budget deficit. This is what the markets have told Portugal, Spain, Ireland and others to do. It has not worked. On the contrary, all have suffered a series of credit rating downgrades. These countries, like Britain, are not growing and so their deficits will remain large. It is no coincidence that Britain's public-sector borrowing requirement has been revised up several times by the Office for Budgetary Responsibility.

What the Portuguese case has also shown definitively is that elected politicians, particularly in smaller countries, are now completely powerless in the face of financial capital and the credit rating agencies. If the past few years have proved anything, it is that there is one rule for big banks and another for countries. Anyone who doubts this should ask why European banks continue to be allowed access to unlimited loans at 1 per cent interest rates from the European Central Bank, while the likes of Greece, Spain, Ireland and Portugal have had their borrowing costs soar in some cases to 10 per cent.

Indeed, it is little reported by the media what big banks have done with these blank cheques. As well as using them to cover the black holes in their balance sheets caused by the sub-prime crisis, they have pumped billions into buying up short-term government debt at high interest rates. In doing so, they've made a fortune, and because of the EU's "bailout" fund, they are able to keep doing so in the knowledge that the EU will not allow any of its member states to default.

The only conclusion to be drawn is that the financial sector is too powerful and too big to fail, and has offloaded its risks on to individual countries and the EU. This is a profound threat to democracy.

Now the focus of the financial markets, scenting blood in the water, will most likely move to Spain. Unlike Greece and Ireland, Spain has sound public finances and is several years into a concerted plan to reduce government borrowing. Its systemic problem is its unemployment rate, which is the highest in the EU and has reached 40 per cent among 18-to-25-year-olds. Yet Spain is not the only country in the EU with a systemic problem. Italy has high unemployment and a huge government debt-to-GDP ratio.

The challenge for the left across Europe is to use this ammunition to win the debate on how to reduce budget deficits and show the public that we have yet to tame the financial sector.

In his New Statesman interview this week, Nick Clegg talked of how the Liberal Democrats are working to "rebalance the British economy". They are doing no such thing. In fact, the financial sector has returned to business as usual. Flush with cheap money that it has ploughed into offering small government loans at eye-watering expensive prices, it is loading enormous debts on to millions of Europeans and their children.

There are two very obvious lessons from Europe's debt crisis. One is that austerity and the obsession of deficit fetishists is not saving indebted countries. The second is that the financial sector has found a new way to make easy money and hold countries to ransom at the same time. If these lessons are not learned, and fast, Europe's debt tower will eventually collapse.

Benjamin Fox is political adviser to the Socialist and Democrat group in the European Parliament.

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Meet Anne Marie Waters - the Ukip politician too extreme for Nigel Farage

In January 2016, Waters launched Pegida UK with former EDL frontman Steven Yaxley-Lennon (aka Tommy Robinson). 

There are few people in British political life who can be attacked from the left by Nigel Farage. Yet that is where Anne Marie Waters has found herself. And by the end of September she could well be the new leader of Ukip, a party almost synonymous with its beer-swilling, chain-smoking former leader.

Waters’s political journey is a curious one. She started out on the political left, but like Oswald Mosley before her, has since veered dramatically to the right. That, however, is where the similarities end. Waters is Irish, agnostic, a lesbian and a self-proclaimed feminist.

But it is her politics – rather than who she is – that have caused a stir among Ukip’s old guard. Former leader Paul Nuttall has said that her views make him “uncomfortable” while Farage has claimed Ukip is “finished” if, under her leadership, it becomes an anti-Islam party.

In her rhetoric, Waters echoes groups such as the English Defence League (EDL) and Britain First. She has called Islam “evil” and her leadership manifesto claims that the religion has turned Britain into a “fearful and censorious society”. Waters wants the banning of the burqa, the closure of all sharia councils and a temporary freeze on all immigration.

She started life in Dublin before moving to Germany in her teens to work as an au pair. Waters also lived in the Netherlands before returning to Britain to study journalism at Nottingham Trent University, graduating in 2003. She subsequently gained a second degree in law. It was then, she says, that she first learnt about Islam, which she claims treats women “like absolute dirt”. Now 39, Waters is a full-time campaigner who lives in Essex with her two dogs and her partner who is an accountant.

Waters’s first spell of serious activism was with the campaign group One Law for All, a secularist organisation fronted by the Iranian feminist and human rights activist Maryam Namazie. Waters resigned in November 2013 after four years with the organisation. According to Namazie, Waters left due to political disagreements over whether the group should collaborate with members of far-right groups.

In April 2014, Waters founded Sharia Watch UK and, in January 2016, she launched Pegida UK with former EDL frontman Steven Yaxley-Lennon (aka Tommy Robinson). The group was established as a British chapter of the German-based organisation and was set up to counter what it called the “Islamisation of our countries”. By the summer of 2016, it had petered out.

Waters twice stood unsuccessfully to become a Labour parliamentary candidate. Today, she says she could not back Labour due to its “betrayal of women” and “betrayal of the country” over Islam. After joining Ukip in 2014, she first ran for political office in the Lambeth council election, where she finished in ninth place. At the 2015 general election, Waters stood as the party’s candidate in Lewisham East, finishing third with 9.1 per cent of the vote. She was chosen to stand again in the 2016 London Assembly elections but was deselected after her role in Pegida UK became public. Waters was also prevented from standing in Lewisham East at the 2017 general election after Ukip’s then-leader Nuttall publicly intervened.

The current favourite of the 11 candidates standing to succeed Nuttall is deputy leader Peter Whittle, with Waters in second. Some had hoped the party’s top brass would ban her from standing but last week its national executive approved her campaign.

Due to an expected low turnout, the leadership contest is unpredictable. Last November, Nuttall was elected with just 9,622 votes. More than 1,000 new members reportedly joined Ukip in a two-week period earlier this year, prompting fears of far-right entryism.

Mike Hookem MEP has resigned as Ukip’s deputy whip over Waters’ candidacy, saying he would not “turn a blind eye” to extremism. By contrast, chief whip, MEP Stuart Agnew, is a supporter and has likened her to Joan of Arc. Waters is also working closely on her campaign with Jack Buckby, a former BNP activist and one of the few candidates to run against Labour in the by-election for Jo Cox’s former seat of Batley and Spen. Robinson is another backer.

Peculiarly for someone running to be the leader of a party, Waters does not appear to relish public attention. “I’m not a limelight person,” she recently told the Times. “I don’t like being phoned all the time.”

The journalist Jamie Bartlett, who was invited to the initial launch of Pegida UK in Luton in 2015, said of Waters: “She failed to remember the date of the demo. Her head lolled, her words were slurred, and she appeared to almost fall asleep while Tommy [Robinson] was speaking. After 10 minutes it all ground to an uneasy halt.”

In an age when authenticity is everything, it would be a mistake to underestimate yet another unconventional politician. But perhaps British Muslims shouldn’t panic about Anne Marie Waters just yet.

James Bloodworth is editor of Left Foot Forward

This article first appeared in the 17 August 2017 issue of the New Statesman, Trump goes nuclear