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Portugal to launch new talks on disputed austerity

Published on 22/09/2012

Portugal's embattled government will hold talks soon with trade unions and industry bosses on alternatives to tough austerity measures after a storm of criticism of planned spending cuts.

The moves were decided following an eight-hour meeting of the advisory Council of State convened late Friday by President Anibal Cavaco Silva.

It followed a statement by Prime Minister Pedro Passos Coelho that he is open to dialogue after his proposals met with fierce opposition.

They included raising employees’ social contributions from 11 to 18 percent of wages, while cutting those of employers from 23.75 to 18 percent in the hope of creating jobs.

“The government is neither blind nor deaf and I will not stay silent,” Passos Coelho told parliament Friday.

“I have not confused determination with intransigence,” he said.

Meeting deficit targets is key for Portugal to receive more funds under an EU-IMF rescue package negotiated last year worth 78 billion euros.

But the spending cuts and economic reforms required as part of the bailout have caused a recession, with the economy shrinking by 1.2 percent in the second quarter, much faster than the 0.1 percent rate in the first quarter.

The contraction is expected to reach 3.0 percent for the whole year.

Hundreds of thousands of Portuguese marched last Saturday in Lisbon and cities across the country against the austerity, and the CGTP union has called for further mobilisation on September 29 in Lisbon.

Thousands rallied outside the presidency as the Council of State, which is rarely consulted, was meeting.

They threw fireworks and brandished portraits of Passos Coelho defaced with the word “robber”.

The council noted “the readiness of the government to study alternatives” to the new measures and said talks with unions and management would take place soon.

“The symbolic measure of lowering management contributions, compensated by an increased contribution by the workers, is still-born. RIP,” said the daily Diario de Noticias in a commentary.