Portugal: Waiting it out

12 Jun

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“Instead of adapting, we turned inward,” says Pedro Santa-Clara, professor of finance at Lisbon’s Universidade Nova. “Funded first by EU funds and then cheap overseas credit, we invested in non-tradable, non-competitive sectors like public infrastructure, construction, telecoms, energy, banks and retail distribution. Restructuring the economy was delayed by as much as 15 years.”

What annoys and simultaneously worries me the most out of everything that’s been going on with the economy in Cyprus is that there is absolutely no vision of where we want to take this country, let alone how to do it. Collecting foodstuffs and organizing charity events is not a solution. We need to create more jobs and to do that we need to invest in more competitive industries. Industries which have a future.

Cyprus newspapers are full of “articles” of how the construction and retail industries have collapsed and how the government can pass legislation to help. Yet these two industries are insulated and non-competitive. Tourism and professional services industries are the only big ones we have and the latter depends on a piece of paper with Russia which can go up in flames at any time.

As for being a medical centre i just don’t see it happening. Especially on a bigger scale. Forget about government officials visiting Israel for this purpose. Israel expects us to refer patients to their hospitals and not the other way around.

Everyone is looking at gas as being the future instead of investing in other areas such as IT.  Cyprus’ IT infrastructure, tech education and business should be one of the priorities of any government and its people for example. It makes up for any competitive disadvantage we may have for being an island in the south-east corner of europe. This is not a suggestion based on evidence, just instinct of course but i’m not a person who can help shape this country’s economic future. Those who can, are trying to hold on to the past instead of focusing on how we can move on to something else.

Portugal’s situation described in this FT article has strong similarities with Cyprus’.

A waiter awaits the arrival of customers to a restaurant at the Alfama neighborhood in Lisbon

“Economic growth is a tough business,” says Prof Santa-Clara. “It means shutting down uncompetitive businesses and redeploying people to more productive industries. You don’t turn a café waiter into a factory worker or a shop assistant into a healthcare specialist overnight. It’s a painful yet inescapable part of the transition to higher growth.”

Others question the feasibility of training an older generation of shopkeepers, café owners and tradespeople who have lost their livelihoods for new roles in the export-driven economy that economists see as the only viable future for Portugal. Mr Vieira Lopes says: “Many of the people over 40 who have lost their businesses are poorly qualified and will find it to difficult to find new employment, even when the economy recovers.”


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