Business, Economics and Jobs

Anti-austerity anger shakes Portugal


Demonstrators wave police association flags outside parliament.


Francisco Leong

LISBON, Portugal — Crowds bellowing revolutionary slogans and chants casting doubt on the parentage of Prime Minister Pedro Passos Coelho have become common outside Portugal's parliament as anger over the government's austerity policies has grown.

This time was different, however. The 8,000 demonstrators who came out last week were no ordinary protesters, but members of the security forces: police, prison officers, members of the paramilitary National Republican Guard.

Their uniformed colleagues on duty defending parliament stood aside as cops denouncing cuts that have undermined the "dignity of their career" stormed security barriers and occupied the steps leading up to the assembly's grand entrance, an area that's normally strictly off limits to protesters.

Elsewhere, the government faced dire warnings. On the same evening, Mario Soares, two-times prime minister, twice elected president and a man revered by many as the father of Portuguese democracy, issued a bloodcurdling admonition.

"There are desperate people without much to lose, that's why I say the president and the government must resign while they can still make their way home on their own two feet," he said. "If not, they will be responsible for a wave of violence."

Another veteran figure in the main opposition Socialist Party said at the same meeting that violent behavior would be justified.

"When a people is deprived of its rights and, in a violent way, sees itself deprived of its means of earning a living and its right to a decent life," said Helena Roseta, president of Lisbon's municipal assembly. "When this happens, all doctrines ... say violence becomes legitimate."

Front-line politicians from the mainstream parties were noticeably absent from Soares' "Conference for the Defense of the Constitution" and few neutral analysts gave credence to the 88-year-old former president's picture of a country on the brink of either civil conflict or a "new dictatorship."

Some dismissed Soares and his band of grey-haired discontents as "political mummies," but there’s no doubt that Portugal is in the grip of deep-seated discontent two-and-a-half years into an austerity program imposed in exchange for a $106 billion bailout from the European Commission, International Monetary Fund and the European Central Bank — collectively known here as "the troika."

Last Monday, an estimated 10,000 protesters gathered outside parliament during a debate about the country's 2014 budget, which will cut salaries for public sector workers earning more than $920 a month by up to 12 percent, reduce some pensions by 10 percent and raise civil servants' working hours from 35 to 40 hours a week.

Although the center-right government's majority ensured the budget was passed, protesters who managed to enter parliament shouted down the finance minister's speech with chants of "resign." Labor union activists later occupied the lobbies of four government ministries.

The Socialists and a resurgent Communist Party are riding high in opinion polls. Strikes have become an almost daily occurrence. Tuesday and Thursday stoppages shut down the Lisbon subway, on Friday, the postal service. Public transportation stoppages alone are estimated to have taken up almost 500 days since Passos Coelho's government took office in June 2011.

Despite the anger, Portugal so far hasn’t seen the kind of violence that became a regular feature of demonstrations against austerity in Greece, the country hardest hit by the euro zone economic crisis.

The Portuguese have traditionally taken pride in their reputation for "gentle manners" characterized by the almost bloodless 1974 Carnation Revolution that ended four decades of right-wing dictatorship.

However, with a 8.1 percent fall in real wages since 2010, unemployment running at more than 15 percent — more than double that among the young — and a surge in emigration to northern Europe, Brazil and booming former colony Angola, emotions are running high.

"Why am I protesting today? Because the government wants to take 60 percent of my pension away from me," said retired subway worker Helder Galdencia on his way home from Monday's demonstration at parliament.

"This is becoming insupportable," he added. "I'm angry with the politicians, fed up with them, I've never known one who's done anything for the ordinary people."

To the government’s frustration, opposition is hardening even as ministers are seeing signs that the tough measures imposed to cut the debt and deficit are beginning to pay off.

The country crept out of more than two years of recession in the second quarter of 2013, registering growth of 1.1 percent, the fastest in the European Union. Although third-quarter growth slowed sharply, it remained positive at 0.2 percent.

Unemployment has also fallen over the past two quarters and at 15.6 percent is lower than a year ago. Tourism is booming. Exports surged by more than 24 percent since 2010 as Portuguese companies have successfully navigated new markets in Asia, Latin America and Africa to counter the European downturn.

The government is particularly proud of its measures to cut the country's once-notorious red tape, which it says are boosting investment. The World Bank's latest ease-of-doing-business index puts Portugal in 30th place, just behind Austria, Switzerland and Japan, and ahead of the likes of France, Spain and Israel.

"There are positive signs in growth, in job creation, in exports, in tourism, in the formation of new companies, investment in agriculture, industrial production and domestic consumption — although there's still room for improvement," Vice-Prime Minister Paulo Portas told a business conference on Wednesday. "These signs together represent an economic turning point. We are out of the hole."

Nevertheless, the government knows there’s little cause for euphoria.

There’s concern the Constitutional Court could overturn a number of government measures crucial for meeting next year's budget deficit target of 4 percent of gross domestic product, from the current 5.8 percent.

EU forecasts show unemployment rising again next year to 17.7 percent. The closure of state-owned shipyards in the northern city of Viana do Castelo with the expected loss of 600 job, triggered anger this week, although the private company taking over the yard said it hoped to re-hire up to two-thirds of the staff over the next three years.

And although debt is expected to peak at 127 percent of GDP this year, doubts over Portugal's ability to meet its commitments mean the government has to pay 5.9 percent interest on its 10-year bonds — more than 4 percent higher than Germany's rate. That spread remains the second highest in the euro zone after Greece’s.

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Unless those rates fall, Portugal will run the risk of having to appeal for a second international rescue package when the current bailout program ends in June 2014.

Passos Coelho says the risk means the country must stay on its current austerity path. That way it could join Ireland, which was able to announce an exit from its bailout program this month.

The alternative would be to follow Greece in being forced to swallow a further dose of troika-imposed measures, a prospect that would surly prompt more public unrest.