IPP Policy Brief #10 is authored by Professor Ricardo Cabral (University of Madeira) and IPP researchers Luís Teles Morais and Joana Vicente. It is based on the presentation prepared for the Conference “Repair and prepare: Growth and the Euro after Brexit” held in 2017 in Lisbon.

With this brief, the authors intend to make a brief critical analysis of the report by the Bertelsmann Foundation and the Jacques Delors Institute (Repair and prepare: Growth and the Euro after Brexit), where the necessary steps and tools for a more integrated Economic and Monetary Union are analyzed, as well as the improvements that must be implemented in order to avoid future crises, ensuring economic stability and growth in the euro area.

More specifically, the purpose of this brief is to identify and analyze the key strengths and weaknesses of the report, focusing on the first two “blocs” (1. “First aid kit” for the euro and 2. Reforms and investment for economic growth), which correspond to a less distant time, and thus less uncertain than the third block (3. Risk of sharing and sovereignty).

They also go on to conclude that the report presents second best solutions in order to circumvent political impossibilities associated with the EMU project and that the first two blocks will not be enough to stabilize EMU and New crises – although they represent important contributions.

Download Policy Brief here.

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Apart from this Government’s competence, the state of grace of Portuguese economic growth enjoys a structural effect from Passos Coelho’ Government.


The title is an ironic throwback to one of the most interesting economics books title’s published in recent years (Carmen Reinhart and Kenneth Rogoff in 2009). With this question about warnings, signals and fate, I want to call your attention to the sensitive political interpretation of recent GDP performance figures. Is it the most appropriate occasion to praise the economic resurrection by raising the figures released by the Instituto Nacional de Estatística (Portuguese’s National Statistics Institute)? According to the published data, the Portuguese economy grew 2.8% in 2017’s first quarter, counting on the contribution of net external demand (NED).

The economic dynamics evidenced by the INE are positive and remarkable. But it poses a problem to political dynamics. The opposition will not be comfortable with this data. Not because it wishes poor results, but because it has trapped itself in an argumentative alley. And that may not be good. When a democratic government is restricted to the criterion of economic performance, the numbers rule. And this is not a criticism of the Portuguese right-wing parties – now members of the opposition at the Parliament. It is a logical corollary of our political system, in which the dictatorship of numbers is transversal to all parties when in the shoes of the opposition. The parties tend to reflect the success or failure of policies from a criterion of objectivity, based on a simplification to which they call “economy” and the way it behaves. But economics is more characterized by a Heisenberg uncertainty principle than by a Newtonian vector sum. I only wish to emphasize the numbers’ instrumental character for a political judgment. Both before – during the PSD-CDS Government – and now – under the “Geringonça”[1] (the “Contraption”).

However, I do not wish to claim that the GDP performance figures do not play a significant role in reading economic performance. Nor do I wish to claim that the GDP data is useless. They aren’t, of course. However, if we are to use economic language, its effects are exacerbated by the existence of a marginal utility with increasing returns to scale in the political system and in the maintenance of government power whenever the GDP data are useful. Thus, in order not to make decisions that are too short-term, we must be careful in interpreting growth data.

What, then? Is this a real effect of the current Government’s policies or are these numbers a delayed effect, which only now is beginning to be felt from the austerity purge implemented by Passos’ Government? While it is true that António Costa always defended a path of economic development based on internal demand, Passos Coelho, by defending austerity, maintained an increased need for an external market. Who was (is) right after all, according to the numbers? To be strict on the matter, I would say that both were and are right. While it is true that NED had a positive balance in the first quarter, it is equally true that the policies for income replacements, the balance of public accounts and the evolution of the indicators of confidence have all contributed to a growth sustainability that has taken place now, under Costa’s governance.

My opinion is that, apart from this Government’s competence, the state of grace of Portuguese economic growth is enjoying a structural effect from Passos’ Government. With budgetary restrictions imposed during the austerity program, with the consequent contraction of domestic demand, Portuguese businesspersons were forced to increase the degree of internationalization in order to reduce domestic demand. Hadn’t Portuguese companies been oriented to other markets, perhaps today we would not be talking about these growth numbers! If any positive aspect resulted from austerity this is, undoubtedly, one of the few to retain. And this redirection to internationalization by companies has had a strong impact on the external accounts sustainability. I would thus say that Costa enjoys a period of sustained economic development. The sustainability of the external accounts by the positive action of the companies’ internationalization, combined with a reinforcement of the internal market by the policies of the current Government, give a glimpse of positive aspects for the future. Bottom line, Democracy works, and care must be taken with excessive manipulations of the data, both then and now.

This care in interpreting data is very important if we do not want to neglect the inherent weaknesses of our economy. Public accounts should continue to show signs of debt reduction. Only this way will be possible for a greater latitude on sustainable policies and the strengthening of the social state that will not exclude the most fragile ones. This is Costa’s merit.

The road is not easy. Crises and economic shocks exist. In these moments, cynicism invites democracies to populism. But Portugal’s recent History and its young democracy show a resilience to the electoral turmoil of the Western world as well as an effective functioning of the party system – hence these numbers and the growth that accompanies them. Portuguese democracy is young – although this is often presented as a problem – but youth can also be an advantage. Indeed, this time must be different. The numbers seem to agree!


José Borges Alves, Researcher at IPP

The Institute of Public Policy (IPP) is an academic, independent and nonpartisan Portuguese think tank. The opinions expressed herein are binding only on the authors and do not necessarily reflect IPP’s points of view, the University of Lisbon, or any other institution.


[1] The geringonça term emerged from the Portuguese right-wing parties to criticize António Costa when he negotiated – in an allegedly desperate way to become prime-minister – a dealing with the Portuguese Communist and Bloco de Esquerda Parties to ensure a parliamentary support for the new government.

O IPP Policy Brief n.º 8 by Professor Francesco Franco (NOVA SBE) is based on his speech at the Conference on Socio-Economic Challenges in Southern Europe Competitiveness in the Euro-Mediterranean region, in 2016 in Lisbon.

Francesco Franco clarifies the necessary conditions to achieve a functional monetary zone, underlining three factors: relative price adjustment, fiscal integration and financial integration.

He also outlines a proposal for a stabilisation mechanism based in a mix of a common stabilisation instrument, such as a european unemployment insurance scheme, and structured “fiscal devaluations”, to smooth the impact of asymmetric shocks in the absence of monetary adjustment between Euro area member states.

Download this policy brief here.

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As part of the 2017 edition of the Budget Watch project, we publish our third Report.

This results from the analysis carried out by an IPP-ISEG team, concerning rigor, transparency and fiscal responsibility. In addition to the analysis of these dimensions, the Budget Watch also includes an analysis focused on business-friendliness, which consists of the Deloitte Pro-Business index.

This analysis served primarily to support the evaluation by the Budget Watch Scientific Advisory Board, composed of 19 economists/scholars, behind the IPP-ISEG Budget index. The analysis is intended to be purely technical, independent and objective in the light of best international practices of reporting and the budgetary process.

Download: IPP Report 3. (Portuguese only. English translation will be available soon)

Our eighth policy paper discusses the results of the analysis of the responsibility of the State Budget proposal for 2017 by the Budget Watch Scientific Advisory Board: IPP-ISEG Budget index.

The IPP-ISEG Budget index results from the analysis of the Portuguese government budget for 2017 by the Budget Watch Scientific Advisory Board, composed of 19 Portuguese economists/scholars. With the support of an analytical report, the members of the Board answered a questionnaire, organized around 10 principles of fiscal responsibility.

This assessment is made in the perspective of rigor, transparency and responsibility. The analysis is intended to be purely technical, independent and objective in the light of best international practices of reporting and the budgetary process. The Budget Watch project also includes an analysis of the business-friendliness of the Budget, which consists of the Deloitte Pro-Business index, to be released shortly.

Download: IPP Policy Paper 8 (Portuguese, PDF).

Research assistant at Institute of Public Policy Thomas Jefferson – Correia da Serra since September 2016.

She graduated in Economics at ISEG – Lisbon School of Economics & Management (2012) and holds a Masters in Economics and Public Policy (2015) from the same institution, with a minor in Finance and Public Administration. Her master’s thesis focused on the current corporate governance of state-owned enterprises in Portugal, considering as case study the public transport company Carris.

As international experience, attended a Summer Course in Dublin Business School (2011), where she developed her knowledge of management subjects.

Previously, she worked two years for Deloitte, as a tax consultant in the Transfer Pricing department.


Policy Brief 7

IPP Policy Brief n.º 7 is one of the publications produced during “European Semester” discussions in Portugal.

In this policy brief, Henrique Lopes Valença develops a critical analysis of the European Commission’s 2016 Country Report. Starting with this report, and the argument that pins macroeconomic disequilibria on the difference between production structures in the different european economies, Henrique suggests this argument should not merely consider said structures in isolation.

The author underlines the existence and interaction of a specific set of conditions in three dimensions: the aforementioned differences, the spread of a dubious diagnosis of these economies’ troubles, and limitations associated with the European economic integration process.

Download: IPP Policy Brief 7 (Portuguese, PDF).

Francesco Franco

Est européen celui qui a conscience d’appartenir à un tout. Si l’on n’a pas cette conscience, et si donc on n’est pas européen, cela ne veut pas dire pour autant que l’on est un barbare. Mais on n’est pas européen sans le vouloir”

Rémi Brague, Europe, la voie Romaine.

The all-embracing cause of Brexit appears to be the desire of retrenchment from the globalization process. England, like most of the West, experiences stagnation in lower incomes, a rise in inequality and the absence of a vision for the future. Unhappy citizens ask why and populist parties offer the only rapidly intelligible answers: free movement of people and capital; off shoring of jobs and loss of national sovereignty are the causes of your problems. Given that the European Union promotes free movement of people and firms and legislates laws and treaties, one answer is to exit the EU. Therefore Brexit.

The paradox is that the United Kingdom, the most cosmopolitan nation of the World (at least in a not too distant past), knows that Autarky generally results in lower income growth, higher inequality and in autocratic regimes. More, the UK knows that minding one’s own business does not work in a time of international crisis. The UK knows that Autarky cannot be the answer to the citizen legitimate concerns.

Admittedly the European Union was unable to express satisfactory common responses to the multiple turning points that have appeared since the beginning of the 21st century. This is true for the two EU decision-making methods, the community (read the European Commission) and the intergovernmental (read national governments). The latter showed dis-unity in the response to the Iraq war or to the tragedy of the refugees. The former was unable to respond to the current account crises of Greece, Portugal and Ireland without the external assistance of the IMF.

The predominantly rule-based governance of the EU can be sound on trend, when the geopolitical and economic environment is more or less stable but in crises one needs rapid and intelligent decision-making. We have one example of such an assumption of responsibility: the pledge of the ECB to be a lender of last resort for the Eurozone. This decision permitted to reabsorb the euro sovereign debt crisis that had emerged in the aftermath of the current account crises in the periphery. The UK is not part of the Euro, and as such did not experience this European capacity of taking decision. But this is not enough; we need more capable decisions to go forward.

How can we empower Europe with a leadership capable of responding to the crises in the globalization process? There are several options that are considered that can be subdivided in two groups. The first group increases political integration and proposes to strengthen the community method. The second group reinforces the intergovernmental method. The discussion must proceed with the objective to find a solution that creates the consciousness of being European.

Francesco Franco is a member of the board of directors of IPP and Professor of Economics at NOVA SBE.

Views herein are those of the author(s) and do not necessarily reflect those of IPP, the University of Lisbon, or any other institution which either the authors or IPP may be affiliated with.

Research fellow at Institute of Public Policy Thomas Jefferson-Correia da Serra.

His PhD research and additional publications have focused on the development and reform of Social Security systems.

He has worked as the Senior Policy Advisor in the Ministry of Social Solidarity of East Timor, where he was responsible for the design and implementation of the first public pension scheme in the country (2010-2012).

Subsequently, as Attaché for Cooperation in the Embassy of Portugal in East Timor, he was also involved in political dialogue process, being in charge of the cooperation representation and management (2012-2015).

Currently, he is the coordinator of the project “A Pension System for the Future” led by the Institute of Public Policy and Cidadania Social, with the support of the Calouste Gulbenkian Foundation, and is teaching Public Social Policy at INA.



Throughout the months of April and May IPP will contribute to the public discussion on the Stability Programme and the National Reform Programme, two key documents of the “European Semester”.

The “European Semester” is a process of political dialogue between the European Commission and the member states which consists in an exchange of drafts, programmes and recommendations regarding the implementation of public policies and institutional reforms. The month of April is particularly relevant in this dialogue, as it is during this month that the EU member states are required to submit two key documents: the Stability Programme and National Reform Programme.

The Stability Programme is the main document on fiscal policy and the sustainability of public finances in the medium term. The budgetary targets set each year in this document, in conjunction with macroeconomic forecasts that underlie them, are used by the European Commission staff when assessing the compliance of EU member states with the main medium-term fiscal rules.

On the other hand, the National Reform Programme is broader in its scope and should reflect a strategic vision for public policy and institutional reform. According to the presentation made by the Portuguese Government, the Portuguese National Reform Programme, which will be known later this month, will be organized around six main pillars:

1. Qualifications
2. Innovation
3. Territory
4. Modernising Government
5. Firm recapitalisation
6. Social Cohesion

Over the coming weeks we will publish original works by experts on these areas in order to actively contribute to the public debate over such relevant documents to the national political strategy of the next few years.