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Portuguese force austerity plan back to drawing board

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Portuguese force austerity plan back to drawing board


Angry Portuguese told their government to disappear in stronger language than ever at their presidential palace near Lisbon on Friday. Politicians and even unions were surprised by the fury in the crowd.

The people rejected outright the latest austerity lashing proposed by the centre-right government of Prime Minister Pedro Passos Coelho, measures he had planned to impose next year. But after eight hours with his cabinet and a summons from President Anibal Cavaco Silva, Passo Coelho backed down.

He withdrew his proposal to raise social charges that workers pay out of their salaries from 11% to 18%, while dropping employers’ charges to 18% from 23.75%.

That would have amounted to a two billion euro transfer from the workers’ pockets to company pockets, a move the premier hoped would beat back unemployment from nearly 16%. But those clinging to jobs called the calculation worse than useless.

Baker’s assistant Paulo Mourinha said: “It doesn’t help owners or workers. At the end of one year our loss would add up to the equivalent of one month’s salary. And as charges stay high for the owners, they can’t increase our salaries.”

Bakery owner Licino Guedes agreed the move would be painful and unhelpful: “If the employee had to pay more toward social security and I paid less, the savings for me would still not amount to enough to hire another employee, so it wouldn’t work.”

A fall in consumer spending in Portugal has been directly attributed to the rise in VAT to 23% and an increase in tax on salary incomes. The recession is projected to stretch well into next year, with much of the country feeling crushed and heading downhill.

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