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Portugal’s parliament to adopt austerity budget

Published on 30/11/2011

Portugal's parliament was expected to adopt a 2012 austerity budget Wednesday that it hopes will rescue the country's crippled economy despite the risk of worsening social unrest.

Just days after thousands of workers descended onto Lisbon’s streets to join a protest strike, lawmakers were preparing for a final vote on an unpopular budget package that cuts salaries, raises taxes and increases working hours for vast numbers of workers already squeezed by recession.

Approved on a first reading on November 11, the bill enjoys solid support from the centre-right majority in parliament and the opposition socialists have said they intend to boycott the vote.

Ahead of the parliamentary session later Wednesday Prime Minister Pedro Passos Coelho said he was aware of the “enormous effort” required of Portuguese citizens to overcome the financial crisis while Foreign Minister Paulo Portas added the country “is in a very difficult situation.”

“But it is important that the country is working and that those who do want to work can find work instead of bumping up against picket lines of strikers and strikes everywhere.”

Portugal’s unions and leftist parties have bristled at the latest round of austerity measures that mostly target state employees, calling a general strike on Thursday last week that shut down the capital’s transport system and triggered protests throughout the country.

Faced with massive popular discontent, the centre-right coalition opted to ease some measures after the first reading. Thus the suspension of 13th and 14th month salary payments for civil servants will now affect only those earning more than 1,100 euros a month rather than 1,000.

That concession will cost state coffers 130 million euros which will be covered by higher taxes on capital revenues.

However the 30-minute extension of daily working hours for private sector employees will be maintained in the final legislation. Also maintained are health and education spending cuts and a rise in VAT on a range of products including a leap from 13 to 23 percent for the restaurant trades which owners say could result in the closure of 21,000 eateries.

After Greece and Ireland in 2010, Portugal became the third eurozone member state needing a bailout in May when it could no longer raise fresh funds at sustainable rates on the financial markets.

Portugal was handed a 78 billion euro loan in exchange for a pledge to reduce its public deficit from 9.8 percent of gross domestic product in 2010 to 4.5 percent by the end of 2012. But the deficit stood at 8.3 percent earlier this year, putting that objective in doubt.

The forecast for 2012 looks no better, after the announcement by Finance Minister Viktor Gaspar last week that its economy is expected to shrink by three percent in 2012.

Unemployment is also set to rise to a record rate of 13.4 percent.