The causes. Inflation and “small print”

Since 1994, inflation has always been below 5%, since 2001 it has always been below 4% and since 2011 it has been practically non-existent.

In 1984 inflation was 28.4% and in 1990 it was 13.59%. That’s why the younger ones don’t know and the older ones have forgotten what inflation is, as the Prime Minister reminded us yesterday.

Generations of politicians, economists, managers, social agents, especially those under the age of 50 (who finished university studies less than 30 years ago), did not anticipate inflation and are understandably on paper.

And millions of Portuguese were convinced by the evolution of the facts and by the discourse of the specialists that inflation was a thing of the past and that, therefore, it made no sense to prepare for it.

That’s why they are naturally scared and start to look at the past and remember what I heard from Vitor Bento a few years ago: the loss of purchasing power of the most disadvantaged – always the biggest victims of inflation – was with inflation and the measures imposed by the IMF in the 1980s much worse than what was suffered by the imposition of the troika from 2011 onwards.

And the measures proposed in August by the PSD and refined last Friday and those announced yesterday by the Government have to be understood in this context.


So let’s move on to the government’s proposals.

Once again António Costa performed a number of illusionism, with three clear intentions:

  1. pretending to cover the PSD’s social support proposal,
  2. “win” on TV news and headlines (see, for example, that of Correio da Manhã) and
  3. not “spend” almost any of the slack of State revenue increases to be able to give another “bodo to the poor” and remedied in 2023.

Let’s take a quick look at the illusionist Oscars:

(a) the announced reduction of VAT on electricity from 13% to 6%;

(b) The payment of 125 euros to those with an income of less than 2700 euros (to say that there is also support for the middle class); and

(c) The payment of half-pension monthly to retirees in anticipation of what would be paid from January 2023.

As for the reduction in VAT on electricity, Costa did not say that the 23% VAT on part of the bill does not change (and it is the majority of the Portuguese bill), so what he said and how he said it is pure misleading advertising.

As for the 125 euros paid in October, this corresponds to 10.4 euros per month. And for those who receive 1350 euros a month, a possible border from where one enters the middle class, this value corresponds to an increase of 0.06% when inflation in 2022 is already at 9%. In other words, more misleading advertising.

Finally – and most shockingly – the payment in October of half a month of pension is just the anticipation of what would be paid monthly in 2023, which will thus be reduced to half, in fact – as several economists explained yesterday – an excellent “business” for the State. for the following years. Including this anticipation in the announced value of 2.4 billion euros is, once again, misleading advertising.

As Minister Medina revealed today, the anticipation of about half of the value of the legal increase in pensions in 2023 is in the amount of one billion euros, so the government’s package is really 1.4 billion, and thus less than the that the PSD presented last week.

Therefore, if the legislation of the general contractual clauses in the adhesion contracts and the promotion campaigns were applied to the Government’s proposals, they would be considered totally illegal: if the “small print” were read, everything could be considered fraudulent.

But if so, will this not turn against the Government? I honestly don’t think so. For the following reasons:

a) What was announced has been heard by millions and will be seen in headlines by hundreds of thousands, but the “small print” only thousands will bother to see;

b) When they receive the bonus in October, two of the pillars of the social support base of the PS will be happy (the retired and those who do not pay IRS, with the third pillar – civil servants – in a few weeks they will have their package) ;

c) If contestation and irritation are felt, despite this, it will be promised that in 2023 there will be more;

d) And the President of the Republic – once again – ordered Marcelo to make a comment in support of the Government and to remove the rug from the opposition, when he said that “the package is balanced”.

In other words, the problem is not that the measures are not useful, positive, reasonable. The problem is that they were deceptively dressed to deceive and seduce us further.

Nothing that is not normal in politics, nothing that is born now. Yesterday Mariana Mortágua rightly said that this was “a trunk of illusionist tricks”. I will only add that it should be said that it is a much larger and more misleading chest than usual.


But there is something else. All these measures, in their most relevant aspects, contribute to reinforcing the ongoing trend of relative loss of purchasing power of the middle classes, once again witnessing the approximation to lower incomes.

This is a political option, which is legitimate. The PS has preferred for almost 7 years – and even more recently – to develop an assistance line oriented towards its social support base.

António Costa has no illusions that with each passing day he loses more support from the productive middle classes that work in the private economy.

He therefore believes that it is not worth having a strategy to conquer them, as long as he continues to invest in support for the three pillars on which his electoral base is based.

The measures now announced reveal that disposable income (including direct subsidies, low-cost services, and wages, less taxes, fees and activity cost) has now leveled even further to the detriment of social sectors not valued by the PS and its Government. Comparing the minimum wage with the average wage confirms everything I say.

But if the comparison is between disposable incomes, the proletarianization of the productive middle classes of civil society (workers in the private economy, service providers, small and medium entrepreneurs) took another big step forward yesterday, which the PSD proposal (which reduced the IRS of some levels) aimed at filling.

Again, this is all legit. But what amazes me is the depressed resignation of the middle classes.


Against what I am referring to, the announced measure on leases that actually covers part of the middle class will be mentioned. So let’s see in detail.

A few days ago, INE announced that the increase in housing rents in January 2023 will be 5.43%, as the reference period is the 12 months until the end of August.

For this reason, from the outset, such an increase will certainly be much lower than the value of inflation for 2022, which the European Commission predicted in July to be 6.8%, but which everything indicates that it will approach 8% or even 9 %.

In any case, there is strong social pressure for the increase in rents to be less than 5.43% (increasing the loss of income already foreseen for landlords) or for the State to support in one way or another part of the increase in rents ( and in this case those who will have a loss of income are those who pay indirect taxes, which we are all, and IRS that about 2 million taxable income holders do not pay).

The Government’s option was, as is known, the second one, but in any of them there is a group that will always be the most affected, and they are the middle classes, who over the years have invested savings in real estate and who are, in proportion, the biggest payers. of taxes.

What’s more, the Portuguese people’s expenses are not limited to rental costs and therefore they are suffering the cost of inflation for almost everything in which they invest their income.

For the generality of these other increases, no defense can have the middle class Portuguese other than the reduction of direct and indirect taxes.

It should be noted that increases in income are only suffered by around 930,000 households (out of a total of 3.7 million), that is, by one third of families, who live in rented houses. And only 2.2% of the total pay more than 1000 euros per month, which can be considered the limit from which, as a rule, one can speak of middle-class families.

About 70% of all tenants pay less than 400 euros per month, which corresponds to the most disadvantaged. In other words, only about 20 000 middle-class families are protected by the government measure.

But then who will pay for this measure? It is evidently those who pay taxes, in their overwhelming size and amount, the middle classes. No one will be against supporting tenants. But, being that way, we have to be aware that those who bought a floor and are paying interest on the financing will not have aid and the situations (for the same level of disposable income) are similar.

And the problem is real: according to the Bank of Portugal, at the end of 2021, “there were 1.45 million mortgage loan contracts in the institutions’ portfolio, an amount identical to the previous year, corresponding to a debt balance of 90 .2 billion euros”.


a) protecting tenants and not those in debt to buy a house is a policy option that treats those in a similar situation differently;

b) Supporting some of the tenants (especially those who are not middle class and almost all not paying IRS) is another policy option;

c) These policy options objectively mean sacrificing the middle classes to protect those who pay little or nothing in taxes, because they cannot pay due to their low income;

d) The only solution that would not sacrifice the middle class is to lower indirect taxes and the IRS because only then would there be justice for them, which is another political option.


Andre Ventura. Of all the leaders of the opposition parties who appeared yesterday to comment after António Costa was the most consistent, clear and competent to criticize the Government’s measures. And he did it in a calm, professional, moderate way, benefiting from being a tax expert.

As the famous Fernando Pessa would say, “And this one, huh?”.


Yesterday Professor Miguel Coelho, in his usual article in Público, demonstrates that – for those who have not lost their jobs – the entry of the troika in 2011 generated a “relatively modest” loss of purchasing power in 3 years and that in a few months of 2022 the loss of purchasing power is already “clearly more severe”.

For anyone who thinks it’s important to read the “small letters” and not just watch government power points on television in prime time, I suggest reading: the title is “The Troika was for boys”.


In yesterday’s Público, there is a report by Cláudia Carvalho Silva, about the state of the Pinhal de Leiria, 5 years after it burned down and the promises made by the Government.

The summary, which I transcribe: “Today the dry grass is piling up, invasive species conquer land and there are trees planted that have already died”.

The question is for all of us: why do we silently tolerate government promises that we know are not kept? And who believes that Serra da Estrela will be different?

And by the way, I want to correct the fact (and apologize) of not having realized last week that João Diogo Correia, from Expresso, had written in March of this year that the Left Block had made redundancies and not lost employees, as emerged In August.


After a week, it is confirmed that the Minister Marta Temido, who resigned, will have to take the proposal to reform the SNS to the Council of Ministers, which will not materialize. It seems evident that this was born out of the irritation of the Prime Minister who did not want to resign at this point.

But worse than that, the new Minister of Health – whoever he may be – will have to carry out a reform that he didn’t put a nail or burlap on.

This objectively means a disregard or, alternatively, the choice of Secretary of State Lacerda Sales, who is admitted to have been involved, but belittles him.

Source: Expresso by

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