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Comment by steveBK123 | Hacker News Reader

Portugal is an interesting microcosm of the general economic problems in EU vs US.

I don't think tinkering with income tax brackets/credits is going to fix the actual problem - robust and steady job creation of good paying jobs.

There are ~11M people in Portugal, 3M of which are in Lisbon metro and 2M are in Porto metro areas. This leads them to having the same problem as Japan - the population is decreasing, BUT the countryside and 2nd/3rd tier cities are emptying out.

So housing affordability in the major cities remains poor. The youth therefore get squeezed out and emigrate, leaving an increasing tax burden problem paying for all the benefits given to the increasingly aging population.

My father visited his home town in the countryside in the last decade and found much of the town essentially abandoned. No one lived in the home he grew up in. His uncle owned an inn that had no guests, etc.

Meanwhile, Portugal remains a beautiful place and I will visit more in the future, and could even see wanting to retire there.

View on HN

The EU and USA both have free movement between states.

But the USA has massive federal tax revenue and spending which redistributes wealth from rich states to poor states. Federal taxes are much higher than state taxes.

By comparison the EU has high state taxes, but very tiny "confederal" EU level revenue. So much less ability to balance things between rich and poor member states.

This puts poor states like Portugal into a bad position where they suffer from brain drain due to the free movement, but don't get enough monetary benefits from the EU to counteract that.

This turns Portugal into a gateway country for the EU: they have loose immigration rules because they want to attract young workers. But as soon as those workers live in Portugal long enough to get an EU passport, many brain drain away to other (better paying) EU countries, and need to be replaced with even more immigrants.

> This puts poor states like Portugal into a bad position

The only reason Portugal (and Ireland, Spain, Greece, etc) is counted as a "Developed Country" today is because of the EU.

These countries received the lion's share of EU Development Funds until EU expansion in the 1990s-2000s.

If Portugal didn't join the EU, it would have been similar to Argentina - it's economic peer until EU ascension in 1986

Spain is x3 the nominal GDP of Ireland and x6 Greece and the 15th economy in the world and the three together are of the size of Canada.

Maybe your comment about what defines a developed country might be overly simplified...

> developed country

Developmental indicators, nominal GDP per Capita, and median household income.

Before Spain, Ireland, Greece, and Portugal ascended into the EU in the 1970s-80s, their developmental indicators largely mirrored those of developing countries from that era (Malaysia, Turkey, Argentina, Iran).

It was EU developmental funds that helped these countries not fall into the middle income trap.

The only developing countries that were able to escape the middle income trap without EU Development Funds or oil were South Korea, Taiwan, Singapore, and Israel.

Also, having a large GDP does not mean a country is developed. China and India have the 2nd and 5th largest GDP in the world, yet their median household incomes are less than that of Thailand, Mexico, or Malaysia - let alone countries defined as developed by the IMF.

Portugal, like Spain and Argentina, faced significant historical challenges in the 20th century. Portugal's fascist regime, which lasted until 1974, limited investment in infrastructure and economic development. Spain, under Franco's dictatorship, also faced political and economic constraints. Argentina, too, experienced political instability and economic turmoil, particularly during the 1970s military dictatorship.

Also were mentioned Malaysia, Turkey, and Iran, which have their own unique historical contexts that I'm not as familiar with.

Absolutely.

And that doesn't have anything to do with my point that Spain was a developing country well into the 1990s, and that most of the post-Franco era development was subsidized by EEC and EU Developmental Funds

Read this, it's a good overview of the process - https://www.elibrary.imf.org/display/book/9781557753199/ch02...

Yep, Spain was a dictatorship until about 50 years ago, well within many people's living memory. Even worse, why is it a democratic nation (sorta--they still have a king after all) now? Because they got tired of living in a dicatorship? No. It's because the dictator got old and died, and I guess they couldn't find a new dictator to replace him.

It shouldn't be any surprise that a nation and culture so tolerant of living in a dictatorship isn't exactly leading the world.

Franco designated his successor. It was supposed to be the previous king Juan Carlos. He reinstated the monarchy and became king instead.

In terms of getting rid of dictators, you also have to realize that since the Spanish civil war (1936-1939) there was a dictatorship until 1975. That is a lot of time to purge any opposition. Your last sentence is uncharitable and overly simplistic.

None of that about Portugal is true.

What's wrong about that? Salazar absolutely did a massive number on Portugal, with a horrible economic policy, and spending ungodly amounts on colonial wars in Angola, Mozambique, Guinea, East Timor, and Goa.

Portugal to this day has fairly weak human capital compared to it's peers.

From where I understood Salazar got power in first place because he improved an even shittier economy, and this was his early source of popular support.

His economic reign was bunk even compared to neighboring Spain

On the eve of the Carnation Revolution, Portugal had one of the lowest literacy rates in Europe, one of the lowest GDP per Capitas in Europe, one of the lowest electrification rates in Europe, etc [0]

In the early 1970s, it was unimaginable for Portugal to become a developed country, and if it wasn't for its ascension into the EC, it would have stagnated.

[0] - https://www.cia.gov/readingroom/docs/CIA-RDP85T00875R0017000...

"Historical challenges" are a lame excuse for poverty. Singapore faced equally severe challenges but they seem to be doing well economically. Portugal could do just as well if they cared enough to make it a priority.

Somewhere in the 16th and 17th century economic power shifted from the South to the North. Venice became Amsterdam.

Singapore has it's location- a politically stable enclave in South East Asia. Portugal is competing with the likes of Denmark and Germany.

Yes, EU is hurt a lot by being a currency union with freedom of movement without being a true federal state.

It is helpful to the core rich countries and to elite/upwards mobile across countries. But it hollows out the periphery.

A lot of the GFC era EU debt crisis was German banks lending to southern European states to then buy goods/services from.. German industry. So I was not as understanding of the northern countries looking down at the "lazy south". It was far more complicated than this and they were happy to look the other way while it worked for the first decade.

I'm honestly not sure where EU goes from here as the GFC & the response dampers any enthusiasm for a true federal government, unified military, etc. Not that there was much appetite to hand over that much sovereignty to start with. Nor does it help that post-GFC, even the rich parts of EU have further diverged in terms of wealth/income from the US, so they are probably feeling even less "generous".

Draghi wrote a whole report on EU competitiveness recently and in standard Eurocrat form its like a 500 page paper no one will read, let alone action.

And that is precisely the issue with the EU.

I was always supportive of the spirit of the European Union and its ultimate objectives, but in its current state, it's a brutalized self-sabotaging entity that has disillusioned the general public to veer rightwards. And with furthermore technological lagging vis-a-vis China and the US, and the immigration crisis, not to mention the Russian Axis round the corner and the collective inaction of a number of EU states around that, and it's no wonder the EU is falling back into 3rd place.

And for some reason, the EU still thinks net uncontrolled refugee migration is good for their economics,their population and their electability, as is letting American private equity buy up large swathes of residential properties. Guess that's what you get when you let freeloaders who haven't worked a real job in their lives hold unelected positions of power.

From my impression of Germany I can tell you they would do the same suicide without the eu.

> it's a brutalized self-sabotaging entity that has disillusioned the general public to veer rightwards

It hasn’t, it only disillusioned those people (like the brits) who didn’t understand the purpose of the EU to begin with. The economic benefits were always considered secondary objectives, subordinated to the main principle of cooperation. This is public knowledge, it was made very clear in the foundational documents of the EU. And therefore the EU has indeed been very successful and its effect is unprecedented: since its inception, we are seeing the longest period ever recorded without a war between European countries.

The Brits perfectly understood one of the aims of the EU and always disagreed with it.

One of the aim is political integration and weakening of each member's sovereignty. The UK does not want this but was OK with the common market.

When the question of whether to join the EU, the brits were actually manipulated by their politicians, who presented the EU as an “economic” project. This perception never went away, so when the EU proceeded as it had intended from the beginning, the brits started to resist and realised they had been mislead. The EU stipulates very clearly that the common market and its potential economic benefits are simply a means to an end; that end is to get European countries to see each other as equals.

No, the end is to destroy national identities and cultures and we are seeing an increasing pushback against that.

I feel that if British concerns, including about immigration and free movement had been addressed Brexit and the current turmoil within the EU would have all been averted. This disconnect with the people's concerns is a key issue the EU has to face or be torn apart.

Germany suddenly deciding to reintroduce border controls is especially telling and highly ironic.

> No, the end is to destroy national identities and cultures

I was referring to the official position of the EU, which is verifiable in their public documents; I don’t care about far-right propaganda. People of course are free to care more about “cultural identity” (whatever it means in the 21st century), than about war. But it doesn’t change the fact that the EU has been successful in creating the longest period of continuous peace in the history of the continent. And this is what it intended from the beginning.

I think the formation of EU was irrelevant for peace.

It's all NATO.

And even then, it's arguable whether they did a good job or put too much unneeded pressure to Russia.

Nobody will declare war on their neighbour when they depend on them for food and other essential resources.

The EU addresses resource and cultural motivations.

NATO intimidates countries that already want to take resources from their neighbours.

NATO has its merit as well, but the EU is unarguably one of the main reasons why EU countries have not even begun to think about creating military conflict within member states since the 1950s.

I think the formation of EU was irrelevant for peace.

Disagree. Going from a bombed-out, stone-age hellscape to conflict-free and essentially borderless in just 47 years was a very impressive achievement. Unfortunately for the past several years we've been headed in the reverse direction.

I think throwing abuse like calling my previous comment "far right propaganda" is a case in point of how rotten the debate has become in Europe on any actual, serious issues, and especially on the possibility to express concerns.

To deny the very existence of cultural identities is also quite bizarre. Of course countries have their own cultural identies and this is in fact something absolutely key in the current political dynamics in Europe.

Your theory about EU intentionally destroying cultural identities, isn’t supported by any document published by the EU or any conference transcripts. No EU official has ever described this to be the goal. I’ve only heard about it in far right media. So as a matter of fact, it is far right propaganda.

If you want real cultural identities, build a time machine and travel back before airplanes, the internet and neoliberal finance rendered cultural divisions in western countries obsolete.

I see... Have a very nice day.

> Your theory about EU intentionally destroying cultural identities, isn’t supported by any document published by the EU or any conference transcripts.

You yourself state that the final objective of the EU has always been complete integration across all departments. I don't see how it's possible to retain individual cultural identities in that construct - either you'd have to compromise on representative democracy and equally distribute representation across all cultures, making the vote of a Croat valued more than that of a German, or you'd end up making the vote of the Bulgarian irrelevant against the vote of the French. This is kind of already the case in more closely integrated federations of a similar kind - India and Russia. Individual cultures are slowly being replaced across regions, as people are forced to learn Hindi and Russian to get a job or access some government benefits, in spite of the protests of their respective state governments.

> If you want real cultural identities, build a time machine and travel back before airplanes, the internet and neoliberal finance rendered cultural divisions in western countries obsolete.

Your arguments are precisely the kind of uneducated drivel that provide fuel to anti-EU sentiment

> This is kind of already the case in more closely integrated federations of a similar kind

And it is already the case in western countries. Learning english is more or less mandatory at this point, while democracy is being influenced by consumer culture and media, which are often produced by multinational corporations, financed through a global network of banks and distributed via the internet. But this has nothing to do with the EU, in fact it isn’t being intended by any single institution or organisation as an aim in itself. It’s a far bigger and frankly irreversible phenomenon that emerges from present conditions.

Germany is reintroducing border controls to stop immigration from OUTSIDE Europe. They aren't doing it to keep out the Dutch or Austrians.

Nobody is against freedom of movement of EU citizens.

Control of non-EU immigration is a concern that is not being addressed. In fact Germany's catastrophic open door policy in 2015 probably precipitated Brexit and is what coming back to bite them now.

But there has also been concerns about internal migration since 2004 when Eastern European countries joined. This is not only in the UK and is still the case now.

Eastern European migration only threatened local jobs, which ended up being a non-issue eventually, as mid-level jobs in all sectors move back to Eastern Europe. The one exception here is healthcare, where Eastern European professionalsbleave as soon as they get the chance to.

The current crop of unfettered non-EU migration is not only an employment threat but also a security threat and a threat to the entire concept of the European welfare state.

There is not enough internal immigration to cause any disruption to national identity.

Sure people have been complaining about criminals from poor eastern europe moving to wealthy countries but the numbers were never high enough to actually change the national identity. Internal transfers of hard working people were (and are) always cherished and we celebrated diversity as long as laws were respected.

Importing people from Africa and the Middle East in large numbers changed the face of Europe dramatically.

> There is not enough internal immigration to cause any disruption to national identity.

The British expats in Spain and Portugal are famous for learning the local language and culture.

> No, the end is to destroy national identities and cultures and we are seeing an increasing pushback against that.

The creation of a pan-European identity does not in anyway degrade from having a "British identity", as you can see in places like the USA with Texas.

Whilst net migration was above 0, this was mostly due to arrivals from outside the EU, as we can see from post-Brexit immigration figures, EU free movement has always been a two way street that many Brits took advantage of (those "expats" in Spain).

I think the EU project is partially trying to thread the needle of maintaining ethnostates without the nationalism. That is, maintain the culture/language/food without the periodic bouts of war/etc.

Neat idea, but is quite a challenge.

The US in general is different from even an imaginary future federal EU in that, as some say, "America is an idea". I know people who can trace their "American Heritage" back to pilgrims/boats, and others who naturalized in the last decade. No one aside from true nutcases really gives much thought to the difference. There is no legal distinction aside from naturalized citizens being unable to be President, is about it.

Most people I know have lived in multiple states, sometimes across completely different regions. People don't derive any strong identity to the state they were born or spent the most time in. Most people I know would just identify by the current state they live in.

There are of course regional differences, but you can move from one region to another and mostly drive the same car, eat the same food, wear the same clothes, buy the same products, shop the same stores, etc. This is a feature or bug depending on your perspective. I think we are sort of like a cultural Borg.

The plus side is the US quickly adapts and/or adopts aspects of the culture & cuisine of each wave of immigrants over time. You can get pho in random strip malls nowhere near a big city, and we'll adopt any holiday if it means more drinking, like say Cinco de Mayo.

> This is a feature or bug depending on your perspective

For businesses that don't rely on national pride of patriotism as part of their image, it's a massive feature.

The press vilified the EU in the UK for decades, at school I had one lesson in geography on how the EU worked and that was it. Wasn't covered in history or anything. It just all added up and the European identity never took hold in the UK outside center liberals.

> Germany suddenly deciding to reintroduce border controls is especially telling and highly ironic.

Well, I'm driving very often to Belgium via A4 and there are rarely any controls. A44 to Liege is more common but not A4. You could have always been stopped at the border, for whatever reason, even with free movement. It's not like they stop everyone at their border. By the way - from 16th of September for 6 months...

In my opinion, the problem is the people. The EU is going in the direction its going with the support of the people.

Every once-in-a-while you'll hear about how Europe is becoming less relevant, less competitive, and falling behind. Many reasons are pointed out: too many regulations, too much bureaucracy, too little investor funding, too little risk appetite etc. And then all of that is promptly ignored and we're back to

>but we need all of these regulations, otherwise we'll be like America!

and

>Europeans are actually better off!

Imo it's European people that defend all of these things, not just something unelected bureaucrats do.

I think its a gerontocracy issue.

Older European generations have negotiated for the current state of affairs which are nice for existing homeowners who are near and in retirement.

This is at the expense of the youth who have eye watering levels of youth unemployment, near 20% in many EU countries. It's 25% in Portugal (vs 6.5% overall) and was as high as 35% in the last decade. These levels make it hard for the next generation to build a career, savings and future for themselves.

Note US current unemployment rate is about 4% with youth unemployment being 9%. So US youth unemployment is ~2x overall while Portugal for example has youth unemployment at 4x the overall rate... much more skewed.

The EU has its problems.

No country in the EU would have been better off if the EU hadn’t been formed.

The only way the EU can be described in the economically apocalyptic way you are is if you don’t consider the alternatives at all.

Consider Greece, which is the poster child of the EU economic failures.

Outside the EU Greece would have completely collapsed. The only thing that gave it some sort of leverage to get out of a long standing mess was the fact that being part of the EU still gave it some credibility with lenders which gave it time to recover to whatever degree it has.

In a nutshell, the EU had a lot of problems but the pre-EU situation would have been significantly worse.

Outside the EU, Greece could devalue the Drachma.

> No country in the EU would have been better off if the EU hadn’t been formed.

EU, the economic union. Not the political union and the bureaucratic machine that tagged along.

> Outside the EU Greece would have completely collapsed. The only thing that gave it some sort of leverage to get out of a long standing mess was the fact that being part of the EU still gave it some credibility with lenders which gave it time to recover to whatever degree it has.

You give Greeks too little credit. Outside the EU, they could have devalued their currency, spurred investment from second-world countries (notably China) without answering to a preachy EU blocking them, etc. Greeks imo are some of the most hard-working people in the EU at the moment, perhaps even the most. The EU didn't give them the flexibility to adapt, so that Germany could maintain its supremacy.

Portugal's GDP PPP is about 485 billion dollars. About the same as Tennessee.

Portugal received about 3 billion dollars from EU funds in 2021. About the same Tennessee received from the US federal government in that same year.

I fail to see how a nominal difference in internal organization leads to much different outcomes.

edit: I got some bad data on my search, my bad, will leave my mistake up.

Loans and Bonds are not serviced in purchasing power - they are serviced in exchange rate $s and €s.

Portugal (and a significant portion of EU members) had an economic meltdown during the Eurozone crisis from 2008-14, and are still trying to service those loans and bonds to this day.

Also, Portugal's GDP is half that of Tennessee's.

In fact, Portugal has the same population size as Michigan and North Carolina, yet a GDP that is ~50% and ~33% in size respectively.

PPP is used solely to compare Portugal to a US federation unit. The economy of Portugal happens in Euro and Tennessee in Dollars, and that is immaterial to this argument.

PPP is not a useful comparison unit when nominal $-€ conversions and costs are extremely well understood.

Which US state has an economy of a size comparable to that of Portugal?

Does that change when the relative value of Euro to Dollar fluctuates?

> Which US state has an economy of a size comparable to that of Portugal

Oklahoma, but Oklahoma also only has 40% of the population of Portugal.

Despite being in the Western half of Europe, Portugal is economically comparable to an Eastern European country like Poland or Slovakia.

The only US territory (not state - even poor Mississippi has a higher median household income and GDP per capita than much of Western Europe excluding Germany and Scandinavia) that is comparable to Portugal is Puerto Rico.

In fact, the problems Puerto Rico faces today in the US mirror those that Portugal faces in the EU.

If you are comparing the aid an EU country gets vs the aid a US state gets.. You do not really need to do any PPP or currency conversion.

Take the GDP, in local value, against the aid they receive, in local value.

Then you have a percent, which you can compare between the two agnostic of PPP/currency/etc.

Right, Portugal nominal GDP is 300B EUR so that 3B EUR subsidy is 1% of GDP.

Tennessee nominal GDP is $420B and the last figure I found for federal aid to TN was $10B but this was 2014 data, at which point TN GDP was $350B. So ~2.5-3% of GDP in aid from the feds, quite a lot more than Portugal.

Also this is simply the direct aid in TN budget that comes from Feds. Often there are other direct payments/transfers from Feds to individuals who file federal taxes while living in TN, which is not captured in that $10B number.

Yep.

A major issue was the ascension of then poorer CEE states in the 1990s and 2000s.

This meant the bulk of EU Development Funds which used to go to Southern European countries like Portugal and Greece ended up getting diverted to countries like Hungary, Poland, Romania, Bulgaria, Slovakia, etc.

Unlike the CEE countries, Portugal's pre-EU era rulers (eg. Salazar, post-Revolution military junta, trade unions) did not invest in human capital to the same degree that CEE's pre-EU rulers did.

In 2021, USA federal government spent $113.3 billion in Tennessee according to

https://www.usaspending.gov/state/tennessee/2021

Including $72.6 billion in direct payments.

Indeed - TN budget shows individual departments like DOT getting $1B+ of federal money alone.

https://www.tn.gov/content/dam/tn/finance/budget/documents/2...

This misses the component of interstate distribution. Depending on how much federal taxes Tennessee paid, that 113 B could become positive or negative.

It looks like in 2023, the IRS collected ~96 billion from TN

https://www.irs.gov/statistics/soi-tax-stats-gross-collectio...

The U.K. has the same problem. Remove London from the equation and the U.K. is poorer than the poorest US state.

And like the EU there’s very little investment from London out to the regions

This leads to increased demand for housing in London (and to a lesser extent Manchester and a couple other big cities) and a vicious cycle.

Even worse, an ambitious young person can’t go anywhere else other than London thanks to Brexit.

In the U.K. the median wage outside London is about 20% above the minimum wage. There’s basically no point in doing anything other than the lowest shittest job you can find. Hell a masters degree will only net you about 30% more than minimum wage in many sectors.

I’ve just spent 2 weeks in the US, including being in Florida since Sunday. A young colleague has been working in our DC office for much of the last 2 years on a non immigrant visa. He went for a h1b and has got it, he’ll be leaving for a local employer by the end of the year.

For the first time ever I’m actually thinking the problems of the US are now less than those of the U.K., and even potentially Europe, and were I 20 again I’d be looking at the US as a target.

Yes I've worked nearly 20 years with teammates in London and watched how much even London & NYC have diverged in that time.

There was a brief period post GFC where it seemed like the US had lost its way and Europe had the right idea. Europe leaned hard into austerity and self immolated while the US just grew our way out of it and into the future.

As an American, I've always sort of held the stereotype of Europe as being a fun place to vacation. Nice lifestyle if you've made your money already, probably elsewhere.

Unintentionally or not, Eurocrats seem to have done everything they can to perpetuate this further and further. Between austerity, regulation, bureaucracy, etc it just seems like the whole continent is encased in amber, focussed on how to slice up a static/shrinking pie.

It’s a nice lifestyle even if you haven’t made your money as long as you have a full time position.

The work-life balance is so tilted towards life that it’s already semi retirement for people with full time jobs because job security is so high.

Best is getting a job in the European Union (in Belgium ) , United Nations, or other multi country agency.

Yes but I do wonder how sustainable that WLB is in the EU for someone in say their 20s or even 30s now.

At some point the declining demographic situation means your taxes will go up, and the percent of budget going towards retirees will go up.

Meanwhile the retirement age for current workers like you will increase, but future benefits you will receive when you eventually retire get cut.

It's basic math of any shrinking & aging country as the worker:retiree ratio shrinks.

Noticed odd things in Spain - there is no suburb.

Cities there transition instantly from high-rise apartments to rural farms.

And prices in cities seem far above what the locals could possibly earn.

My grandparents' village has been growing, but only because it has become a sleeper town for Aveiro (and maybe Porto - there's a train station nearby).

Portugal is such a great place to live, it just lacks reasonably paying jobs.

> So housing affordability in the major cities remains poor. The youth therefore get squeezed out and emigrate, leaving an increasing tax burden problem paying for all the benefits given to the increasingly aging population.

At a risk of going off on a tangent, it should be said that this is a direct consequence of the 2007-2008 financial crisis and the resulting 2010–2014 Portuguese financial crisis.

https://en.wikipedia.org/wiki/2010%E2%80%932014_Portuguese_f...

A series of banks went bankrupt, the construction sector was ravaged, the real estate sector plummeted due to a market where neither consumers not producers could have access to credit. With the drop in supply and a constant demand, housing costs skyrocketed even though salaries stagnated. The youth is then faced with the problem of either facing a lifetime of earning salaries that don't allow them to buy or even rent a home or emigrating to places where it's possible to earn a modest living.

Taxes aren't the problem. The bulk of the income of those who can afford a home is already syphoned to service the costs of buying a home.

If housing becomes affordable, people stay and will have disposable income.

I mean you've also accurately described Pennsylvania...

American doomers generally underestimate how much better we have it than the rest of the developed world on just about every economic measure - income, wealth, employment, etc.

Like sure the EU, healthcare & education is cheap/free, but your taxes at the low end will are double to pay for that. And they pay nurses similar to what we pay fry cooks. Even higher pay places like London, UK pay 1/3 to 1/2 what you can make in NYC or SF for similar jobs.

Pennsylvania has an HDI of 0.928 [0] (comparable to the United Kingdom and Luxembourg). Portugal has an HDI of 0.876 [1]

Median household income in Pennsylvania is approx $73,000 [2], but median household income of Portugal is below $20,000 [3]

Sure the US has plenty of problems, but it is absolutely one of the most developed large countries in the world.

The only other large (greater than 50 million population) countries with higher developmental indicators are the UK (barely) and Germany.

[0] - https://en.m.wikipedia.org/wiki/List_of_U.S._states_and_terr...

[1] - https://en.m.wikipedia.org/wiki/List_of_countries_by_Human_D...

[2] - https://www.census.gov/quickfacts/fact/table/PA/INC110222

[3] - https://eco.sapo.pt/2023/01/13/rendimento-medio-das-familias...

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