AMONG EU COUNTRIES, Portugal boasts one of the lowest rates of
unemployment - a continuing legacy, one might think, of the
boom-time late 1990s. But scratching beneath the surface reveals
quite a different picture. "We have 4.5% unemployment but that's an
illusion," says a banker. "There should be more unemployment." With
a public deficit already close to 3%, that's a worrying thought.
During the years of socialist rule, from 1995 to 2001, the number
employed by the civil service rose to excessive levels.
Unemployment peaked at 8% in 1996 but fell within four years to
just under 4.5%. By the end of their term in office, the Socialist
party was spending the equivalent of 15% of GDP on public sector
wages.
A quick encounter with the finance ministry in Lisbon betrays how
misguided public expenditure has become in Portugal. Rambling
corridors open off into large, airy offices where only one...
