As Portugal prepares to negotiate an international bailout to rescue its debt-ridden economy, concern is growing over the conditions that will be imposed by lenders and over their social impact in what is already Western Europe's poorest country.
A first mission of experts from the European Union and the International Monetary Fund (IMF) arrived in Lisbon on Tuesday to evaluate Portugal's bailout needs, which have been estimated at about 80 billion euros (115 billion dollars). Lenders were expected to set draconian conditions, including cuts in social spending and public sector salaries, tax hikes, axing of civil service jobs, extensive privatisation and a labour reforms to make firing workers easier.
The Portuguese, however, feel they have already tightened their belts to the limit, and doubt whether their country's sluggish economy will be resilient enough to rebound after taking the bitter medicine prescribed by the EU and the IMF. The country of 10 million residents already has some 2 million poor people, said Catholic priest Agostinho Moreira, who heads the European Anti-Poverty Network in Lisbon.
The people Moreira defines as poor do not even earn a minimum salary, which in Portugal amounts to only 475 euros a month. That is about a third of the minimum salary in Ireland, another eurozone country that was bailed out by the EU and IMF. A typical Portuguese salary amounts to between 550 and 1,000 euros a month.
"They say we need to save more? How on earth can we do that?" asked Neca, a retired Lisbon man who said he had to count the pennies in his pocket to buy himself a cup of coffee. "More and more people must make a choice between buying food or medicine," said a spokeswoman for the Catholic organisation Caritas, which is finding it increasingly difficult to attend to the growing numbers of poor people.
The Portuguese have already suffered three successive waves of austerity as Prime Minister Jose Socrates' minority Socialist government tried to ward off a bailout. The government aimed at cutting the budget deficit from 8.6 percent in 2010 to 4.6 percent this year.
It froze pensions, raised value-added tax and cut public sector wages by 5 percent. Cuts on social spending forced the closure of hundreds of schools. Socrates' fourth raft of austerity measures would have frozen even the smallest pensions, which amount to about 200 euros a month.
But that package was rejected by parliament, prompting the premier to resign, President Anibal Cavaco Silva to call early elections and plunging the country into a political crisis that finally forced it to accept a bailout. The EU and IMF are expected to impose even more austerity than Socrates had done, setting off alarm bells not only on the far left, but even among conservative analysts.
"A tsunami is about to hit us," industry secretary of state Carlos Zorrinho warned. The Portuguese economy has long suffered from less than 1 percent growth, low competitivity and an excessive reliance on labour-intensive sectors - problems that could make it difficult for the country to generate sufficient dynamism after the austerity cure.
Unemployment is currently running at more than 11 percent. "The situation of the country is very complicated," Delmiro Carreira, president of the bank employees' trade union SBSI, said on Tuesday. "I don't know if four or five years will be sufficient to solve it all." "We lived above our means for years, and now we must pay price," economist Daniel Bessa said.
Many Portuguese, however, feel angry about ordinary people having to pay that price, while banks and big companies are seen as enjoying beneficial tax conditions. "Now we know who rules our country," human rights activist Carlos Anjos said. "How about if banks paid taxes for a change, instead of dealing out advice?"
A group of economists meanwhile announced that they were suing the international rating agencies Moody's, Fitch and Standard & Poor's for having done Portugal "serious harm" by "manipulating the (financial) market." The agencies contributed to Lisbon being forced to seek a bailout by downgrading its creditworthiness.
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