Portugal in crisis after 1mn say No to austerity
20.09.12 @ 09:48
BRUSSELS - Portugal is facing a massive backlash against troika-approved austerity measures to raise social contributions for employees.
Portuguese President Anibal Cavaco Silva is on Friday (21 September) to convene a rare meeting of the state council in a bid to defuse a political crisis linked to the controversial measure.
Over 1 million people took to the streets of Portuguese cities on Saturday in protest at moves to boost social contributions from 11 percent to 18 percent for workers and to lower them from 25 percent to 18 percent for companies.
The change would de facto slash one months' worth of salary a year for each and every employee. Employers are also to be given more leeway to fire people.
Trade unions, the Socialist opposition and the junior partner in the centre-right government coalition have all come out against the measure, part of a package of cuts agreed with the troika of international lenders in return for an extra year for Lisbon to meet its deficit targets.
"This measure completely ruins the political consensus that was behind the bailout programme," Ana Gomes, a Socialist Portuguese MEP told this website.
She blamed the government for tabling the moves, but also the troika for accepting them in the teeth of public feeling.
The scale of the popular resistance came as a surprise, with fellow bailout country Greece normally the one in the headlines over anti-asuterity street protests.
"It is not the fault of the Portuguese, they have accepted everything so far. The troika wanted to show Portugal is a good pupil, compared to Greece, abiding by the book. But the problem is that the book is wrong. Austerity is killing the economy," Gomes aded.
In her view, Portugal should be given even more time to pay off its debt and the interest rate on its loans should be lower.
Currently, small enterprises are paying 5-6 percent interest rate even though banks get the loans from the European Central Bank at one percent.
If the stand-off continues, eurozone finance ministers meeting in Luxembourg on 8 October could in theory delay the payment of the next tranche of Portugal's €78 billion bailout.
"Protests and recent developments are a bit odd as they are in contrast to the latest troika decision to give Portugal an additional year to adjust," said Carsten Brzeski, an economist with ING Bank.
"Portugal is not the next Greece but the dire economic outlook won't make the required adjustment any easier. The latest developments show that the recent calm in the euro-crisis will not last forever and that eventually the destiny of the eurozone is in the hands of governments and voters," he noted.