24 Nov 2010

Protests in Portugal amid Irish austerity

Washington Correspondent

As Faisal Islam reports from an Ireland reeling from the announcement of austerity measures, Siobhan Kennedy watches the protests in Portugal, the potential next bailout hotspot.

Portugal‘s biggest unions have staged their first joint strike in more than two decades, in protest at planned austerity measures designed to shield the country from euro zone contagion heightened by the Irish banking crisis.

The Portuguese are concerned they fill face the same pain as the Irish, who today heard the bill for their decade-long boom in the form of major austerity measures, part of the condition of their bailout.

VAT will go up, income taxes will go up, there will be a new poll tax on property, a cut in the minimum wage, and the sharpest ever spending cuts in Irish history.

Economics Editor Faisal Islam said the cuts would prove “vastly more regressive” than those in the UK, and one City analyst described them as “staggering austerity.”

Portugal at standstill

In Portugal, the city came to a standstill.

CGTP union said all ports were now shut, and check-in counters at Lisbon’s main airport was empty. National airline TAP has cancelled most flights. However no mass protests were expected on Wednesday.

Lisbon was relatively quiet as many workers were prevented from going to work but roads in around the capital were choked with heavy traffic as commuters opted to use their cars.

Cafes and shops were open and vans delivered goods as usual.

Lisbon airport official, Rui Oliveira, told Channel 4 News that 374 flights were cancelled at the airport, both incoming and outgoing.

A passenger reads as she waits at Lisbon airport

“I’ve worked my whole career in the airport and I’ve never seen anything like it,” he said. “From 10pm last night till midnight tonight everything’s cancelled.”

Pedro Santos Guerreiro, director of the Jornal de Negocios business daily wrote in an editorial on Wednesday that the strike would have no impact.

But the country’s largest exporter, Volkswagen’s Autoeuropa plant, halted production altogether. The plant produces up to 500 cars on an average day.

The unions hope to tap into the growing dissatisfaction with the minority Socialist government’s austerity measures, which include across the board spending cuts in public services.

Read more: From crash to cuts - Channel 4 News special report

But following Ireland’s announcement that its intention to seek assistance from the EU and IMF, investors are turning their attention to other financially weak euro nations like Portugal, which faces acute pressure to restore confidence in its economy.

Portugal has suffered from years of low growth and waning competitiveness which economists say undermines its ability to ride out the debt crisis.

Maybe the strike will not provoke radical changes in the austerity course the government has chosen, but it does represent an additional element of uncertainty in the already unstable setting in the country. Elisio Estanque, a sociology researcher

Even though the economy is growing this year, economists fear it will slide back into recession in 2011 as higher taxes and civil servant wage cuts of five percent bite into consumption.

Unemployment is already at its highest since the 1980s at 10.9 per cent and there are fears that this could rise further.

There are concerns that a wavering in the government’s commitment to new austerity measures could push up Portugal’s borrowing costs in the same vicious spiral that forced Athens and Dublin to seek rescues.

Ireland's got the bill for its decade long-boom - but what are the conditions of its bailout? Read more from Faisal Islam. 

“Maybe the strike will not provoke radical changes in the austerity course the government has chosen, but it does represent an additional element of uncertainty in the already unstable setting in the country,” said Elisio Estanque, a sociology researcher at the University of Coimbra.

The country’s risk premium – or spreads on its bonds over safer German Bunds – hit a euro lifetime high on 11 November and was close to that level on Wednesday.

Madalena Costa, 66, a retired school teacher, said: “What’s coming for the new generation is very sad. I don’t see a solution for them aside from emigrating to other countries where they may have new opportunities.”

Others were angered by the protest, saying the country could not afford the stoppage, the first general strike by the country’s top two unions since 1988.

“This strike is completely absurd,” said Pedro Silva, 36, a biology teacher at a private school, who was forced to take a taxi to work. “The Portuguese have to understand that there is no money and if there is no money people have to work to get it.”