What would we do without The New York Times? Without them, how would we ever figure out that what’s ultimately behind the economic crisis in Portugal isn’t bad banking or irresponsible lending or ill-thought-out fiscal policy, but in fact socialist housing law…
Portugal’s antiquated tenancy rules, for instance, stem directly from two revolutions that cemented leftist antagonism toward owners and landlords: the first was in 1910, which ended the monarchy, and the second was in 1974, which overthrew a dictatorship and returned Portugal to democracy.
The post-revolution rules helped protect tenants, but also led to a chronic shortage of rental housing. This, in turn, persuaded a new generation of Portuguese to tap recently into low interest rates and buy instead — often in new suburbs — thereby exacerbating the country’s mortgage debt and leaving Portugal with one of Europe’s lowest savings rates, of 7.5 percent.
“This system of controlled rents is a major problem for the Portuguese economy, but we will probably be waiting for a generational change to have room for institutional reform,” said Cristina Casalinho, chief economist of Banco BPI, a Portuguese bank. Beyond fueling housing credit, she added, the system “basically stops flexibility and mobility in the labor market because you can perhaps find a new job in another city but it will then be very difficult to rent a house there.”
So you see how this works? It’s not just that austerity measures have to be inflicted upon the state sectors of Europe. It’s that theses measures ought to be imposed, as the welfare state in fact bears the ultimate responsibility for the crisis, setting up the imbalanced markets that led directly to all the bad loans. Hmmm….
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