Portugal's economic crisis is closing in on Prime Minister Pedro Passos Coelho, who is facing unprecedented protest rallies, as well as criticism from across the political spectrum. "Passos Coelho's loneliness is enormous," the daily Publico wrote recently, after hundreds of thousands of Portuguese vented their rage against the government's austerity policies in dozens of cities.
Passos Coelho is convinced relentless austerity is the only way for his country to solve its economic problems - but hardly anyone in Portugal believes him any more. Portugal has become "a room where there is no more oxygen to breathe," award-winning architect Eduardo Souto de Moura said. Meanwhile on Tuesday, Armenio Carlos, leader of the country's top trade union confederation CGTP, urged President Anibal Cavaco Silva to force the government to resign.
Portugal's previous Socialist government applied for a bailout worth 78 billion euros (101 billion dollars) from the European Union and the International Monetary Fund, after the country's borrowing costs rose to unsustainable levels. The creditor institutions set tough conditions for the aid. Under the conservative government headed by Passos Coelho, which took power in June 2011, Lisbon turned out to be a model pupil, applying the EU and IMF's recipes even further than they had asked it to do. For more than a year now, the Portuguese have had to endure spending cuts on health, education, pensions and public investments. Public sector wages have been slashed, while taxes have gone up. Health and transport costs have also risen.
In a recent move, the government subjected the Portuguese to yet another wage cut by raising workers' social security contributions from 11 to 18 percent of their salary. Employers' contributions, meanwhile, were reduced from 23.7 to 18 percent. The measure implies "an alarming social injustice, which harms workers and favours large companies," Pedro Santos Guerreiro, director of the business daily Jornal de Negocios, wrote in the Spanish daily El Pais.
"We are hungry! We are hungry!" yelled an elderly woman participating in one of the recent demonstrations. She told dpa she was supporting her two unemployed sons with a pension that the government's spending cuts had reduced to 420 euros a month. Similar stories are being told all over Portugal, where unemployment has soared to a historic record of 15.7 percent. Only 55 percent of the unemployed receive some kind of financial assistance from the state. The government is so unpopular that ministers have increased security measures to protect themselves from protesters throwing eggs or tomatoes.
"This government will leave a trail of bodies on the streets," said military bishop Januario Torgal Ferreira. The main opposition Socialist Party, meanwhile, withdrew its support from the government and announced that it will vote against the 2013 budget.
Passos Coelho is coming under criticism even from the ranks of his own centre-right Social Democratic Party. His conservative coalition partner CDC has remained conspicuously silent, sparking speculation that the government would collapse and a snap election would be held. Applying the EU and IMF's advice as thoroughly as possible "is the way to avoid a new rescue" by the two institutions, Passos Coelho argues. "We are enjoying a credibility that we could not count on a year ago, when we were bankrupt," the premier said. The EU and IMF are now expected to reward Portugal's efforts by relaxing its budget deficit targets.
Portugal's borrowing costs have also gone down. But the government's liberal reforms have not managed to revive an economy expected to shrink 3.3 percent this year. Shops and restaurants are closing in Lisbon. The Portuguese middle class, which enjoyed a comfortable lifestyle, is being plunged into a state of economic precariousness where eating out or going to the movies become unaffordable luxuries.
Charity organisations say they no longer have the means to attend to all those in need. Even if Portugal's deficit target for 2013 is loosened from 3 percent of gross domestic product to 4.5 percent, as it expected, the government will not be able to meet it without adopting even more austerity measures, the ratings agency Moody's predicted.