Piketty also laid much of the blame for the ongoing economic and financial crises in southern Europe on the stance taken by the governments of Germany and France.
The economist, whose book ‘Capital in the Twenty-First Century’ - examining trends in wealth and income inequality over the decades - has been a best-seller in several major markets, was in Lisbon on Monday to give a talk and for meetings with various left-of-centre politicians.
The first of these was with Costa, who seized the chance at a news conference after their meeting to criticise the policies of the current right-of-centre government.
“Portugal is indeed an example of the fact that austerity does not resolve the debt problem,” the Socialist leader said. “After four years of austerity, with cuts in salaries and pensions and an increase in the tax burden, the truth is that we today have a debt 30 percentage points [as a share of gross domestic product] above what we had, and we are in a worst condition to be able to pay it off. We need to bring an end to the policy of austerity.”
Piketty, for his part, reiterated his criticisms of policy in the European Union, which he said was largely the result of “selfishness” on the part of the two largest EuroZone members in relation to those with the biggest financial problems - Portugal, Spain and Greece.
“I think the elections in Portugal and Spain this year could serve to make a difference, reorienting Europe,” the French economist said. “The European Union is making a grave mistake in arguing that one can reduce the high level of debt simply based on more austerity.
“When you have a debt of one hundred percent or more of GDP, you must also look to history and to what happened with France and Germany after the Second World War,” he concluded, in a reference to the way debt problems were overcome through economic growth and “some inflation”.
That contrasts with the current situation in the Euro Zone, in which unemployment is high and growth anaemic, he noted. The question of equality is, Piketty added, “central to economic development”.
Piketty also had meetings with Rui Tavares, a former member of the European Parliament and founder of the Livre party, which plans to stand candidates in the general election due this autumn, and with António Sampaio de Nóvoa, a former rector of University of Lisbon who plans to standing in the presidential election early next year.
This comes after the Socialist Party had earlier announced plans to put a swift end to austerity imposed cuts and argued that they would not threaten Portugal’s status as a Euro Zone member.
“Contrary to what the government has told us, we do not need to continue with austerity to keep us in the euro while it is also not true what the radical left has been saying that we need to break with the euro in order to abandon austerity” said António Costa, before affirming that ending austerity would actually better enable Portuguese participation in the euro.
The Socialist Party leader continued to say that governing was not about dreaming but about making dreams reality and that meant “understanding the conditions available for governing.”
Costa stated that he represented an alternative and that the current government had failed by recalling how according to the government’s 2011 forecasts, “Gross Domestic Product in 2015 should now be 7 percent higher than it is, with a debt level of 100 percent and not the current 130 percent and running a budget deficit of 0.5 percent rather than the 2.7 percent forecast.”
The Socialist Party leader was speaking to some 700 supporters and said that while he had overseen the drafting of a feasible economic programme to take into the election campaign, the government was still making unspecified cuts in reference to plans to lop another €600 million off the state pension bill.
Costa concluded that “this means that the government has not only not learned from its errors but also has nothing new to say and the only thing it knows how to present, are cuts” before promising that his government would harm neither state nor household finances.