Portugal Braces for Austerity Battle

LISBON—Portugal is starting to feel the pain of the government’s deficit-cutting drive, raising the prospect of social unrest in a country that has endured three years of austerity with only sporadic and small protests.

Compared with other euro-zone countries caught up in Europe’s debt crisis, Portugal has been a haven of calm. Greece has seen violent protests while in Spain, tens of thousands of people took to the streets in May and June demanding political change.

But Portugal’s unions say the calm is about to change, as the country struggles with economic reforms and budget cuts that the government has acknowledged are unprecedented in size and scope.

“The Portuguese don’t believe something is going to happen until it actually does. Now, it is happening, and it is bad,” said Maria do Carmo Tavares, member of the executive committee of CGTP, the country’s largest union group.

Ms. Tavares said protests are scheduled for the coming months, including in the main cities of Lisbon and Porto on Oct. 1. A general strike is also being discussed, while a youth movement that vows to take “democracy to the streets” has called a rally on Oct. 15.

Unions are also rolling up their sleeves. Police and security guards are preparing group action next month against a government decision to freeze promotions in the defense ministry.

“The Portuguese will certainly step up the protesting, as the economic situation of the country is becoming unbearable,” Ms. Tavares said.

Since taking over in July, Portugal’s right-wing government has announced sharp rises in public transport fees and a substantial increase in fuel taxes. It has also imposed a special income tax for 2011. People making about €1,500 a month ($2,159) will see about a third of one month’s wages absorbed by the one-time levy.

“New taxes and charges are clearly weighing, and it will only get worse,” said Maria Manuela Pacheco da Costa Amaral, who retired earlier this year from her job with a €551 monthly pension, slightly above the minimum wage. To cover her expenses, she still needs to work part-time as an office assistant in Lisbon. She also tends house for her landlord to help pay for the rent.

“Unrest will definitely become common because people are unhappy,” she said.

More hardship is on the way, with cuts in public spending, further tax increases to balance a cut in corporate contributions to social security, and labor changes that include lower entitlements for laid-off workers.

In a recent statement, Prime Minister Pedro Passos Coelho ruled out “quick results or soft sacrifices,” and last week called on unions, employers and employees to work together to avoid social unrest.

“The conflict we are seeing in other societies can be justified, but this isn’t the path we want for Portugal,” Mr. Passos Coelho said.

Portugal has little choice but to take tough steps. The country sought international help in April after failing to convince investors it was doing enough to shore up its shaky finances. In exchange for a €78 billion, three-year loan, Lisbon promised the European Union and the International Monetary Fund that it would slash its deficit and make structural changes to spur growth in key sectors.

The problem is these efforts are expected to prolong the economic slump at least two years and drive up unemployment, already at 12%.

“It’s a tricky situation for the government, which doesn’t have any other option but to implement what is needed,” said University of Lisbon political analyst Antonio Costa Pinto. “The Portuguese will suffer a lot, particularly next year, as more businesses are forced to shut down.”
http://online.wsj.com/article/SB10001424053111903461304576524392772951396.html

This entry was posted in resistance and tagged , , , , , , . Bookmark the permalink.