Increasing unemployment, poor economic forecasts, country in the doldrums, falling house prices, government under pressure. Strange, but it all seems so familiar.

Let’s tell you what happened in Portugal. It was a bouyant country, not the richest in Europe, but business was good and the sun was always shining. But then, around the middle of 2007, things started to go a little pear-shaped. People who once had money found their spending wasn’t going so far as costs began to increase, especially for utilities and fuel. Many salaries remained low, little above the minimum wage of 426€, and spending became stretched.

Cheap food and drink was available from the supermarkets so businesses like bars and restaurants started to feel the pinch as people stopped going out so much. Other shops, such as clothes and luxuries also started to suffer, although mobile phone providers and utilities companies bucked the trend, as they always do.

Then businesses started to close, house prices began to fall and unemployment rose. Soon, almost on a daily basis, news programmes reported factories closing and people being made redundant. Of the jobs that were available, most were low paid, and people started looking elsewhere for jobs. Previously, workers from eastern Europe came to Portugal for jobs, now Portuguese workers were going to Spain, France, Germany or the UK to find work and send money home.

For those in Portugal things were getting tougher. The country started to slide into recession around the beginning of 2008, not helped by a smoking ban which badly affected many businesses, not least our own. The government continued to spin the story that everything was fine, and they were doing a great job, but people were complaining and the opposition parties were saying things were getting worse.

So the government decided something needed to be done. Although Portugal had received millions, if not billions of euros from the EU, they invested heavily in the public infrastructure, like building projects, roads and schools. Promises were made to give every school child a computer, and in a bid to stimulate the economy they reduced VAT (IVA) by 1% to 20%.

Did it work? Was a 1% cut in VAT and increased public spending enough to get people spending? Not really. One of the consequences of the VAT cut was that some companies actually increased prices to compensate, so the overall value remained the same, or even went higher.

As people found life more difficult there was an increase in crime; carjackings increased by 55% over the first few months, and there was a dramatic increase in bank robberies. ‘Soft’ crimes like fraud increased as vunerable people were preyed upon, with some con artists posing as social security officials and stealing hundreds of euros off pensioners. Even the recently unemployed suffered as some companies that went bust were found to have not been paying the national insurance payments for their employees, meaning they were not eligible for any benefits.

Already in the UK there have been reports that businesses will not pass on the VAT cut, with one letter writer in the free London Paper saying their shop has just increased prices by 2.5% before next week’s drop. There was also an article in the Guardian a few weeks ago saying there would be an increase in crime in the UK following a recession, and the BBC was reporting a 25% increase in shoplifting this morning.

As house prices fell in Portugal, buyers also fell as the banks refused access to mortgages, and this was before the global banking crash, while estate agents continued to try to keep house prices unsustainably high. New house building dried up, as in the UK, and many housing projects were abandoned.

Unemployment is continuing to increase, as is crime – as we were leaving Portugal had their first ever armoured car robbery, although some blamed that on ETA, and yesterday two armed men robbed a cafe and the salesman of the proceeds from a games machine.

For businesses times continue to be tough, although one bank, BPN, has tried to insulate itself from losses by salting away 130€ million in an off-shore account in Brazil.

So it’s a odd watching the news and reading the papers as we’ve been through all of this before. It’s déjà vu all over again.