Latest cutbacks in Portugal bring explosive mood

September 14, 2012

LISBON, Portugal (AP) — Nationwide protests are expected to draw tens of thousands, with police bracing for possible clashes. The prime minister's Facebook page has been swamped with irate messages such as "Get lost, thief." Even prominent members of the governing coalition are joining the chorus of rage.

New Portuguese austerity measures announced in recent days may be the tipping point that transforms the nation's sullen acceptance of belt-tightening into an explosion of anger like that seen in Greece over the past two years. It threatens to wreck Portugal's plans for taming its debt woes and spawn another hotspot in Europe's financial crisis, just as the continent was feeling cautious optimism about saving the joint currency zone.

The five days that radically soured the Portuguese mood began last week when Prime Minister Pedro Passos Coelho announced an increase in workers' social security contributions to 18 percent of their monthly salary from 11 percent. The cut is equivalent to a net monthly wage.

Then it was the finance minister's turn to convey bad news. Income taxes will go up next year, Vitor Gaspar said. Public employees will lose either their Christmas or vacation bonus, each roughly equivalent to a month's income, and many pensioners will lose both. More public employees will join the dole queue.

Last year was tough enough, especially for public employees, whose salaries were cut by up to 10 percent as they lost their two bonuses. Meanwhile, property and sales taxes went up, and tax deductions and welfare entitlements went down for everyone.

To top it off, the recession, which the government predicted would bottom out this year, will continue into next. Suddenly, resignation over austerity has given way to fury. Workers and business leaders, opposition parties and government stalwarts — all have joined in sending Passos Coelho the message that Portugal can no longer stand the pain.

In addition to Saturday's mass protests, the Portuguese are due to voice their anger in a series of strikes and other demonstrations over the next few weeks. Social networks have also provided a sounding board for discontent.

In a post on his Facebook page last weekend, the prime minister wrote that the latest austerity announcement was one of the hardest speeches he had ever made. He addressed the message to the Portuguese people, calling them "amigos," and signed it "Pedro." Within a week, the post had more than 56,000 comments — most of them sharply critical, some insulting — and only about 9,400 "likes."

"You've let me down, a lot. Next time I won't vote for you," said one of the milder comments, posted by Natercia Abreu. The suddenly hostile climate could push Portugal along a path similar to Greece, where public defiance has frustrated efforts to lay out a clear path to recovery, damaging Europe's efforts to contain the financial crisis.

Lisbon University professor Jorge Freitas Branco said the Portuguese are feeling "very frustrated" with the economic hardship. "These protests act as a lightning rod, they let people get things off their chest," he said. "The government is going to be under a lot of pressure."

Portugal has won praise from the other 16 countries using the shared euro currency for complying with the terms of the €78 billion bailout agreement it signed in May last year after a decade of paltry growth and mounting debts. The 34-page agreement set out a list of targets Portugal must meet, including spending cuts and economic reforms, by 2014. All three main parties gave their blessing to the strategy in a display of national unity that encouraged foreign lenders.

That has abruptly changed. A third recession in four years has denied the government anticipated tax revenue, and record unemployment of 15.7 percent has drained Treasury funds. That has forced the government to cut deeper.

"I'm angry. Of course I am," said Silvio Alves, a surgeon at a Lisbon public hospital who is close to retirement. Alves belongs to the Portuguese middle-class which has felt the brunt of the cutbacks. He reckons he lost more than €20,000 in income last year.

That meant the family vacation this summer was spent at the homes of friends and family because the usual foreign travel became unaffordable. Alves reports "zero luxuries" at home — a sharp lifestyle change for a surgeon. His wife, whose chain of clothes shops went bust in the recession, keeps a list of what products are cheapest at which supermarkets. They're eating into their savings to support their teenage son's ambitions to find work abroad.

"We're feeling it in our bones," Alves says of the austerity. Maria Jose Rego, a 45-year-old restaurant owner, says tax hikes are killing her business. Last year, the government increased sales tax on meals to 23 percent from 13 percent, pushing up menu prices. A hike in taxes on gas and electricity to 23 percent from 6 percent, meanwhile, drove up costs. Rego and her husband have already closed three of their five restaurants over the past 18 months, laying off about 100 staff. Due to the new measures, they expect to shut the remaining two by the end of the year.

"We're just getting poorer and poorer and it's harder and harder to get by in this country," she said at a protest outside Parliament last week. "People are getting more and more riled. It's time to stand up and fight."

Business leaders are also chafing at the new tax hikes. The measures will bring another crunch in private consumption, which already fell 6 percent in the first half of the year, said Antonio Saraiva, president of the Confederation of Portuguese Industry. What businesses need are steps to get people spending again and generate company growth and new hiring, he said.

Meanwhile, the General Confederation of Portuguese Workers and the General Workers' Union — the two main groups, representing more than 1 million workers — announced a street demonstration later this month and are mulling a general strike.

Antonio Jose Seguro, the leader of the main opposition Socialist Party which endorsed earlier cuts, said the government had gone too far this time and vowed to vote against the 2013 state budget. The government has enough votes to approve the 2013 spending plans anyway.

Signs of strain have also emerged within the coalition government. Powerful members of the Social Democratic Party, the coalition's senior member, expressed dismay at the prime minister's strategy. Former party leader and ex-finance minister Manuela Ferreira Leite described the latest cuts as "surreal."

The Popular Party, the junior member of the coalition, meanwhile, had previously ruled out any more tax hikes. Its senior leaders were due to meet at the weekend amid reports of dissent among its members.

Tens of thousands of people are expected to attend street protests in Lisbon and 20 other cities on Saturday. The demonstrations, organized via a Facebook page by a group of local intellectuals, were called to contest the cutbacks and were to take place under the slogan, "We want our lives back!"

Previous protests have been peaceful, but police this time are watching out for signs of trouble. "For the first time in my life," said Alves, the Lisbon surgeon, "I feel like going to a street protest."