Wednesday

16th Jun 2021

Troika demands likely to target Portuguese workers

  • Portugal is familiar with the strictures of the IMF (Photo: Kyrion)

Experts from the European Commission, European Central Bank and the International Monetary Fund descended upon Lisbon on Tuesday (12 April), set to begin rapid work on the technical details of the austerity and structural adjustment requirements of an estimated €80 billion bailout.

The work, including discussion with local officials, is closed to the public and the delegation will not give out information on the nature of the talks.

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The result of the expert inspection and discussion with officials once concluded will feed into discussions amongst the Socialist Party of the caretaker administration of Prime Minister Jose Socrates and some political parties in opposition, with the aim of reaching a consensus on a bail-out agreement.

The political-party consensus would then have to be approved by EU finance ministers on 16 May, ahead of the country's 5 June election.

The tough measures comes atop three rounds of austerity in the past year implemented by the Socrates administration.

The arrival of the men from Brussels, Washington and Frankfurt is deeply unpopular, reviving memories of the country's two previous IMF bail-outs, a one-year programme in 1978 and another two-year period from 1983-85.

The EU and IMF have said that "strong conditionality" will be attached to the package, including further deep public spending cuts, privatisation and tax hikes.

Although the details of the quid pro quo for any bail-out are yet to be decided, a little-reported IMF staff position note from last November outlining the international lender's policy prescriptions for each of the 17 eurozone states gives a forecast of what is likely to be demanded.

Its trenchant recommendations for the two other eurozone recipients of a bail-out, Ireland and Greece, have been implemented. Dublin matched the document's call for a reduction in the minimum wage and cuts to unemployment benefits, while Athens has attempted to liberalise rules governing a number of professions and looked to privatise transport infrastructure.

For Portugal, the IMF recipe focuses on radical adjustments in the labour market, in particular regarding changes to collective bargaining and a reduction in employee protections.

The document calls for wage bargaining to occur at the level of an individual firm rather than via industry-wide centralised bargaining. It also seeks a reduction in severance payments, which are currently above the EU average, both for fair and unfair dismissals.

The IMF paper goes on to say that employment protection for regular workers should be "relaxed" so that it comes closer to the levels of protection afforded temp workers.

Among other prescriptions, working time regulations should also be eased, performance monitoring of public sector enterprises should be expanded and an environment more friendly to business should be embraced, including a streamlining of licensing procedures, according to the authors of the document.

In the cases of both Ireland and Greece however, the requirements of their respective EU-IMF bail-outs went even further than what the Washington-based lender proposes, as is likely to happen with the Portuguese bail-out as well.

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