Government faces General Strike

By Chris Graeme [email protected]

Portugal’s Socialist PS government is facing an autumn of discontent as two of the country’s largest unions join forces for an expected all-out General Strike on November 24.

It will be the second time that the two giant unions UGT and CGTP will have joined forces in a General Strike since 1974. The first was 22 years ago during the PSD Cavaco Silva government in 1988.

The decision, which will paralyse the country and mean millions lost to businesses, was called by the UGT (General Workers Organisation) and CGTP (General Confederation of Portuguese Workers) unions over the weekend in response to the Government’s announcement of additional austerity measures to calm international financial market jitters.

But it’s not just the unions that are opposing the tough new measures designed to bring Portugal’s ballooning public deficit down to the 7.3 per cent of GDP by the end of the year, as agreed with the European Commission under Stability & Growth Pact rules.

A group of concerned Portuguese economists and business leaders fear that the severity of the measures will strangle economic growth, paralyse business and destroy Portugal’s fragile economic recovery.

The Government’s tough new measures, approved at an emergency Council of Ministers meeting on September 29, aim to reinforce key decisions already taken for the State Budget for 2010 as well as new measures for 2011.

In order to slash Government expenditure by the end of 2011, the Government has decided to progressively cut public administration salaries for state employees taking home more than 1,500 Euros a month, starting with a basic cut of five per cent across the board.

The Government will also freeze public sector pensions, halt automatic career progression and promotion, put a stop on new admissions to public companies and organisations as well as slashing the number of those taken on under contract. Overtime hours and payments will also be drastically reduced.

With regards to the Portuguese National Health Service (SNS), the Government will cut expenditure through medicines and costly diagnostic measures.

Social Inclusion Benefits will be cut by 20 per cent while extraordinary increases by 25 per cent in Family Allowance will also be slashed while a long-promised raise in the national minimal wage to 500 Euros a month is almost certainly out of the question before 2012.

State funds for education transferred to local authorities and funds for autonomous regions such as Madeira and the Azores will also be reduced.

And ministers used to travelling around in style in State-owned limousines will also see their transport perks seriously curtailed.

On the taxation side measures include increasing VAT (IVA) by two points to 23 per cent, revising IRS and IRC income tax deductions and raising national insurance contributions by one per cent.

The latest package of austerity measures comes at a time when both the International Monetary Fund (IMF), the Organisation for Economic Cooperation and Development (OECD) and the European Commission (EC) have made it plain to Portugal that it must reduce its public deficit to 7.3 per cent by the end of this year – currently at 9.3 per cent of GDP – in order to avoid the threat of bankruptcy.

It is a difficult pill to swallow when unemployment in Portugal is believed to have surpassed 10.7 per cent of the working population.

The Government has also announced that it is temporarily abandoning plans for the new International Lisbon Airport, the TGV high-speed rail link between Lisbon and Poceirão on the Spanish border and a third River Tejo crossing.

Right-wing economist, Mira Amaral, a former PSD minister for industry said the measures had arrived “rather late in the day” and warned that Portugal had no alternative but to reduce the “weight of the State” which was causing the country to “economically stagnate.”

Miguel Beleza, a former PSD Finance minister, said that he hoped the emergency measures would “contribute towards reducing the deficit and encourage sustained growth. The idea is to put the house in order”.

Another respected economist and one-time Governor of the Bank of Portugal, Silva Lopes, said: “We’ll have to see how the markets react. These measures have created a more serious crisis and of this I have no doubt.”

Jorge Coelho, the CEO of Mota Engil, a construction company, agreed that public finances needed to be balanced but warned that if the average consumer stopped spending the country would fall into a serious recession.

General Strikes are rare in Portugal unlike in Greece or France. There have only been seven major General Strikes since the end of the monarchy: 1911, 1912, 1917/18 and 1934.