Black Market Radios Even Too Rich for Taxed Portuguese: Economy

Portuguese construction worker Carlos Marques lost his job in 2010 and a year later his unemployment money ran out. So he began peddling everything from old car radios to shoes to scratch a living.

“When I first started, business was booming,” Marques, 46, said as he hawked pans, radios and speakers at the Feira da Ladra, or “Thieves Market,” once a medley of sights and smells from Portugal’s colonial history and now the hub of Lisbon’s underground economy. “Now I’m struggling as most of my clients have lost their jobs or spent most of their income on taxes.”

Multiple years of recession, record unemployment and austerity in southern Europe are taking their toll even on activities that usually flourish during hard times.

The loss of income has been so severe in Portugal, Greece and Spain that it has reduced demand for used or illegal goods and off-the-books labor, according to Friedrich Schneider, a professor at the Johannes Kepler University in Linz, Austria, who specializes in the shadow economy.

“This unusual situation is happening in Portugal, Greece and Spain, which are struggling,” Schneider said. “The bottom line: when there is no money to hire a cleaning lady then you end up doing the job yourself.”

The Portuguese underground economy will drop to 19 percent of gross domestic product this year from 19.4 percent in 2012. In Greece, where more than one in four people is jobless, it will fall by the same increment, to 23.6 percent of GDP.

Austerity Fatigue

The contraction has coincided with the deepest austerity measures in decades to reduce budget deficits, ordered by European leaders such as German Chancellor Angela Merkel. The Portuguese government will present another package of spending cuts in the 2014 budget proposal to parliament in Lisbon today.

It hasn’t gone down well among traders at the Thieves Market in Lisbon, where pensioner Luis Aguiar sells bicycles and furniture across the street from a wall with the words “Merkel Go Away” daubed on it with red spray paint.

“I once sold a car in this market,” said Aguiar, 65. “These days I can’t even sell a second-hand bicycle.”

Set against the backdrop of Lisbon’s 16th-century National Pantheon on a hillside overlooking the Tagus River where Portuguese explorers once set off to discover new continents, the Thieves Market used to reflect the nation’s seafaring and trading traditions.

The sellers of African masks or exotic spices from India to tourists are now outnumbered by hundreds of desperate local vendors who display used clothes, pots, pans and old electrical goods on blankets on the sidewalk.

Trading Speakers

Marques and his wife were selling a handful of old kitchen pots for as little as 1 euro ($1.36) each, alongside a car radio he had just traded for two audio speakers.

“There are more people interested in swapping goods these days instead of buying stuff,” said Marques, surveying his inventory. “People have no money these days.”

Portugal requested a bailout from its European partners and the International Monetary Fund in 2011, about six months after Ireland and a year after Greece, while Spain sought emergency money to clean up its banks in 2012.

Prime Minister Pedro Passos Coelho is still tightening the country’s collective belt to get the budget in good enough shape to start raising more money from bond investors again. Today’s budget likely will include spending cuts exceeding 3 billion euros after the government relied mainly on tax increases to meet targets set out in the aid program.

“How is it possible to realistically tell people that we will lower taxes and increase spending when we need to reduce our deficit?” the premier told RTP television last week.

No Savings

Portugal never had the prosperity to generate the savings deposits some people in Greece and Spain are relying on now to cover their cost of living.

While the Greek and Spanish economies were expanding at an annual rate of more than 3 percent at the end of 2007, Portugal grew by less than 1 percent a year for a decade before the debt crisis erupted in Athens in late 2009.

Portugal’s economy will contract another 1.8 percent this year, a third straight year of recession, according to government estimates. While less than the Greek rate of 27.6 percent, Portuguese joblessness was 16.4 percent in the second quarter, albeit dropping for the first time in two years.

Papa Gei, a 39-year-old Senegalese salesman at the Thieves Market, said things are so bad in Europe that he is telling his friends to stay home instead.

Better Life?

“I came here in search of a better life,” said Gei, who used to work in a farm in Senegal. “If I knew it would be this bad in Portugal I would have stayed working at the farm.”

While Schneider in Linz calculates that the proportion of GDP that’s under the table declined across Europe since 2009, in the north it’s because a gradual recovery in the official economy reduces the incentive to earn “black money.”

The unofficial market in Germany will shrink to 13 percent of Europe’s largest economy from 13.3 percent last year, based on research by Schneider, who wrote an international survey of the shadow economy published this year.

Officials at the EU’s statistics office and the Organization for Economic Cooperation and Development said they do not have recent data on the informal economy.

In Lisbon, Antonio Vicente encapsulates the erosion of living standards in the south.

Parking Meters

The 57-year-old, who became homeless after losing his job as a baker two years ago, makes a living by feeding other people’s parking meters in downtown Lisbon when they expire to prevent their cars from being fined or towed.

“I used to make about 30 euros a day last year from clients,” Vicente said while sifting through a handful of coins after a 12-hour day. “Today I only made 8 euros.”

Both Vicente and Marques, the trader at the Thieves Market, are unlikely to be able join the official economy and are now wondering how to make a living now that their black market clients are running out.

“We have too many people selling stuff to a shrinking number of customers,” said Marques, dressed in a black hat and jeans. “If I can’t find clients to buy my goods I will have to dig deeper into the underground economy.”

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