Baluarte
05-01-2013, 10:22 PM
A new government plan to squeeze public spending for a further four years fuelled anti-austerity sentiment in Portugal on Wednesday as tens of thousands of protesters took to the streets in Mayday marches.
The fiscal strategy for 2013-2017, announced on Tuesday, involves more than €6bn in cuts that will hit public sector jobs, pay and pensions as well as shrink health, education and social security budgets.
Described by the government as an alternative to “bankruptcy and leaving the euro”, the plan shows Lisbon remains unmoved by Europe’s increasingly loud chorus of anti-austerity voices, remaining firmly aligned with advocates of rapid fiscal consolidation.
Pedro Passos Coelho, the centre-right prime minister, is maintaining an unwavering commitment to Portugal’s €78bn adjustment programme as Lisbon seeks to regain full access to bond markets. This would allow it to exit the bailout on schedule next year.
But the planned cutbacks will further polarise a country where business leaders and senior figures in the government coalition parties have joined opposition parties and trade unions in blaming austerity measures for deepening a protracted recession and triggering record unemployment.
It also places the prime minister on a collision course with moderate trade unions whose support he needs for legislation that would allow the government to lay-off tens of thousands of public sector workers.
Leading a march of flag-waving protesters along Lisbon’s central Avenida da Liberdade, Carlos Silva, leader of the UGT, the more moderate of Portugal’s two labour confederations, said unions would reject any cuts that affected wages, pensions or public sector jobs. This raises potential hurdles to government plans to reform the welfare state and sharply reduce the public sector wage bill by laying off workers, measures that would require a broad political consensus if they were not to be reversed by future governments.
A Portuguese court has already twice rejected important government austerity measures as being unconstitutional, while the centre-left left Socialists, the main opposition party, have rejected government calls to negotiate a consensus on reforming the welfare state.
Leading a separate protest march, Arménio Carlos, head of the Communist-leaning CGTP-Intersindical, the largest union confederation, said Portuguese workers were working seven days more a year, “the longest hours in the EU”, while their living standards had “fallen drastically” as a result of austerity policies.
As part of the bailout programme, agreed two years ago, Portugal has abolished four bank holidays and cut statutory annual holidays by three days. Public sector wages and state pensions have been cut and promotions frozen. Overtime rates and redundancy payments have been more than halved, plans to increase the minimum national wage of €485 a month put on hold and taxes sharply increased.
The details of planned spending cuts have not yet been finalised. But the medium-term budget strategy makes clear the size of the fiscal challenges facing Portugal.
According to government forecasts, it will take 25 years to bring Portugal’s public debt down from 123 per cent of gross domestic product last year to below 60 per cent, the maximum allowed in the eurozone. Even this assumes ambitious nominal GDP growth averaging 3.5 per cent a year after 2017.
Vítor Gaspar, finance minister, said a failure to face up to “structural problems that have generated instability and budgetary indiscipline [in Portugal] for decades” could lead to “bankruptcy and an exit from the euro” or, at the very least, “reduce our national sovereignty within the euro for a very long time.”
The budget plan involves fiscal tightening equivalent to 3.6 per cent of GDP over the next four years – €2.8bn next year €700m in 2015 and €1.2bn in 2016, as well as an additional €1.3bn this year to compensate for the budget measures rejected by the constitutional court.
Mr Gaspar ruled out any further tax increases, saying these would be “counterproductive for the economy”. Instead, the brunt of cuts would fall on public sector wages, which are projected to fall from 10.6 per cent of GDP this year to 8.4 per cent by 2017. State pensions and welfare payments will also be hit.
A sharp fall in the current account deficit had enabled Portugal to reverse external financing needs from the equivalent of 9 per cent of GDP in 2010 to a surplus of 0.4 per cent of GDP last year, the minister said.
The country was now moving into the third stage of its adjustment programme, he said, when there was a pressing need to resuscitate private investment.
The fiscal strategy for 2013-2017, announced on Tuesday, involves more than €6bn in cuts that will hit public sector jobs, pay and pensions as well as shrink health, education and social security budgets.
Described by the government as an alternative to “bankruptcy and leaving the euro”, the plan shows Lisbon remains unmoved by Europe’s increasingly loud chorus of anti-austerity voices, remaining firmly aligned with advocates of rapid fiscal consolidation.
Pedro Passos Coelho, the centre-right prime minister, is maintaining an unwavering commitment to Portugal’s €78bn adjustment programme as Lisbon seeks to regain full access to bond markets. This would allow it to exit the bailout on schedule next year.
But the planned cutbacks will further polarise a country where business leaders and senior figures in the government coalition parties have joined opposition parties and trade unions in blaming austerity measures for deepening a protracted recession and triggering record unemployment.
It also places the prime minister on a collision course with moderate trade unions whose support he needs for legislation that would allow the government to lay-off tens of thousands of public sector workers.
Leading a march of flag-waving protesters along Lisbon’s central Avenida da Liberdade, Carlos Silva, leader of the UGT, the more moderate of Portugal’s two labour confederations, said unions would reject any cuts that affected wages, pensions or public sector jobs. This raises potential hurdles to government plans to reform the welfare state and sharply reduce the public sector wage bill by laying off workers, measures that would require a broad political consensus if they were not to be reversed by future governments.
A Portuguese court has already twice rejected important government austerity measures as being unconstitutional, while the centre-left left Socialists, the main opposition party, have rejected government calls to negotiate a consensus on reforming the welfare state.
Leading a separate protest march, Arménio Carlos, head of the Communist-leaning CGTP-Intersindical, the largest union confederation, said Portuguese workers were working seven days more a year, “the longest hours in the EU”, while their living standards had “fallen drastically” as a result of austerity policies.
As part of the bailout programme, agreed two years ago, Portugal has abolished four bank holidays and cut statutory annual holidays by three days. Public sector wages and state pensions have been cut and promotions frozen. Overtime rates and redundancy payments have been more than halved, plans to increase the minimum national wage of €485 a month put on hold and taxes sharply increased.
The details of planned spending cuts have not yet been finalised. But the medium-term budget strategy makes clear the size of the fiscal challenges facing Portugal.
According to government forecasts, it will take 25 years to bring Portugal’s public debt down from 123 per cent of gross domestic product last year to below 60 per cent, the maximum allowed in the eurozone. Even this assumes ambitious nominal GDP growth averaging 3.5 per cent a year after 2017.
Vítor Gaspar, finance minister, said a failure to face up to “structural problems that have generated instability and budgetary indiscipline [in Portugal] for decades” could lead to “bankruptcy and an exit from the euro” or, at the very least, “reduce our national sovereignty within the euro for a very long time.”
The budget plan involves fiscal tightening equivalent to 3.6 per cent of GDP over the next four years – €2.8bn next year €700m in 2015 and €1.2bn in 2016, as well as an additional €1.3bn this year to compensate for the budget measures rejected by the constitutional court.
Mr Gaspar ruled out any further tax increases, saying these would be “counterproductive for the economy”. Instead, the brunt of cuts would fall on public sector wages, which are projected to fall from 10.6 per cent of GDP this year to 8.4 per cent by 2017. State pensions and welfare payments will also be hit.
A sharp fall in the current account deficit had enabled Portugal to reverse external financing needs from the equivalent of 9 per cent of GDP in 2010 to a surplus of 0.4 per cent of GDP last year, the minister said.
The country was now moving into the third stage of its adjustment programme, he said, when there was a pressing need to resuscitate private investment.