We are very vulnerable to external uncertainties – Marques Mendes

US ELECTIONS

1. It seems impossible, but it’s not. Despite being an example of a lack of decency in politics, of not respecting the basic rules of democracy and of being the moral author of the attack on the Capitol, Trump can win this election. Under normal circumstances he should have already been defeated. However, polls point to a draw. Largely because Americans’ two biggest concerns favor it: the economy and immigration.

• The American economy is not bad. GDP is even growing 2.8%. Unemployment is falling. But the public perception, because of inflation, is that Trump managed the economy better than Biden. And in politics, perceptions weigh more than realities.
• Immigration is the other big issue. The public perception is that it is out of control and stealing jobs. All of this favors Trump. Despite its political defects.
• Of course, Kamala could win if Democrats mobilize women strongly on abortion. Therein lies his greatest hope. Never has the issue of women’s rights been introduced with such force in a presidential election.

2. In the meantime, the capital question: is Trump’s victory really that bad? After all, what unites and separates the two candidates?

• First, unite them with China. It is the great strategic enemy of the USA. Both want to combat Chinese growth.
• Second, it unites them with the economy. Both want to protect US companies. Trump wants more customs duties on imports. Kamala wants more subsidies for exporting companies. But Trump achieves the worst: institutionalizing protectionism and combating globalization.

3. Apart from decency and democracy, Europe and NATO separate them.

• Trump’s victory strengthens Putin, harms Ukraine and weakens Europe. It weakens NATO and forces the EU to spend more on defense. It will force cohesion funds to be “diverted” to security in the future. It kills multilateralism and reinforces populism. Radical right forces in the EU will gain a lot of strength. A nightmare in sight.
• If Trump wins, the big victim is Europe. She is not prepared for a shake-up like this in the transatlantic relationship. Hence the fear that is installed in the main European capitals.

THE PRESIDENT OF CM DE LOURES

1. The President of the CM of Loures said, regarding the violence of recent weeks: “I evict, without pity or mercy, for anyone who participated in these events. If he is the lease holder, he must be evicted, period.” This phrase, said by a Chega leader, was not surprising. Said by a PT mayor, it leads us to question: why this statement? The reason is clear: mayors are concerned about security and its electoral consequences.

2. I do not subscribe to the path defended by the mayor. For human and legal reasons. But this does not mean that he has become a dangerous radical. He is just trying to guarantee his election.

• There is a serious problem of public perception of insecurity in the AM of Lisbon and Porto. A perception that has worsened with recent events. People feel that insecurity is increasing and they think that nothing is being done to combat it.
• Thus, the next political victims of the situation could be the Mayors. They risk losing elections. And, as they don’t want to lose, they resort to security discourse. It’s not a question of conviction. It’s a matter of protection. Now he was a PT mayor. Next up will be the PSD. And so on.

3. But the issue is more serious: if the mayor of Loures’ phrase is evaluated in a survey, I suspect that the majority of Portuguese people will say they agree with it. Proof that the Portuguese are radical? None of that. It does prove that they are worried about insecurity. Which forces you to face the problem. The left thinks that what is essential is social integration. The right favors policing. I would say that both actions are necessary. At the same time. And the sooner the better.

THE BUDGET DEBATE

1. As expected, the OE debate had no history. The result was announced. As highlights we had three realities:

• The PM, who made the debate a walk. It can be seen that Montenegro is increasingly confident and assertive. Yesterday’s poll reinforced this by revealing that he is the most popular politician of all.
• Pedro Nuno Santos, who gave a good closing speech. It was clear and balanced in future priorities. It can be seen that he is betting everything on the next municipal elections.
• André Ventura, who did the usual number. It can be seen that insecurity is now his main theme.

2. From now until the final vote, we have one certainty and two doubts:

• The certainty is that the idea of ​​a political crisis is over. We will have OE, the first and probably the only OE approved in this legislature; we will have stability for another year; and we will not have early elections.
• The first question is what will happen to IRC. Are we going to have a 1 pp reduction? Are we going to have a 2 pp reduction? Or will we not have any reduction? If there is a minimum of coherence, the PS will abstain from this vote. After all, the Government reduced the IRC reduction from 2 pp to 1 pp to satisfy the PS’s requirement. If there is no coherence, anything can happen, including the PSDB returning to the initial scenario and presenting itself a proposal for a 2 pp reduction.
• The second question is about pensions. Are we going to have an extraordinary increase to add to the legal update? Everything points in that direction. The PS and Chega want it; the Government does not oppose; the Social Security situation allows; and the measure is fair.

THE VOLKSWAGEN CRISIS

1. What impressed me most about the budget debate was the lack of attention to the adverse international situation we face. With the exception of Minister Nuno Melo, justice be done to him, everyone exhausted themselves in domestic politics. And yet, from abroad, starting in the EU, there are abundant signs of uncertainty and instability for our economy. More attention needs to be paid to foreign policy. It is, increasingly, internal politics.

2. In the same week that a crisis at the German giant Volkswagen was pre-announced, it is very surprising that AR ignores what is happening in Germany and what this could affect us. A Germany in crisis is a drama for our exports. Let’s see:

• The Volkswagen Group has an annual sales volume (€322MM) that is greater than the entire Portuguese GDP (€266MM); and has 115 factories worldwide, one of which is in Portugal.
• The Group, with 684 thousand employees, has seen car sales falling (-4.4% in the space of a year), making it difficult to compete in electric cars with its American and Chinese competitors;
• As a result of this situation, the group took radical decisions: the closure of three factories in Germany (the 1st time in the Group’s history); the dismissal of thousands of workers; a 10% pay cut; and the wage freeze in 2025 and 2026. A serious crisis.

3. Finally, the national repercussions of the case: could this crisis affect AutoEuropa, in Palmela? According to the Economy Minister, no: current production is guaranteed and the minister is even trying to go further and attract the manufacturing of an electric car from the Group to Portugal.

THE ECONOMY AND HOUSING

1. The IBGE data on our economy are not brilliant and reveal three serious realities:

• The first is that the chain growth, quarter by quarter, is very small (0.2%). We are almost stagnant.
• The second is that in year-on-year growth – 2024 compared to 2023 – we are better than the EU average, but much worse than neighboring Spain and below expectations.
• The third is that we are very vulnerable to external uncertainties. If the external situation worsens, the national economy will suffer, meeting the Budget will be more difficult and unemployment may increase. The times we live in require a lot of prudence and no ease.

2. The best information comes from housing credit:

• Interest rates have been falling for a year. The highest point has already been reached in October 2023.
• The relief in installments is significant: in the 6-month Euribor, mortgage loan beneficiaries are now paying €100/month less than a year ago; and, in the 12-month Euribor, the relief in payments to the bank is even greater – €130/month less than a year ago.
• In conclusion: the relief is being faster than expected and the tendency is to continue. A good hope for thousands of Portuguese people.