Portugal is negotiating a bailout deal with the European Union and the IMF. To get the 80 billion euro loan, the government has to meet strict conditions, meaning tough austerity measures. Tax will go up and there will be spending cuts. What are the consequences of increasing VAT whilst cutting wages, pensions, public health spending and social welfare at the same time?
Isabel Jonet, President, Food Bank Against Hunger, says it will be tough for the poor:
“20 per cent of the population are poor. That’s two million people living on less than 400 euros a month. Their living conditions will get even worse.”
Once a week, a lady called Augusta comes to this distribution point in her local parish. She made a modest living as a waitress. Today the widow gets a 216 euro monthly pension. With so little, it is impossible to pay the bills, pay for medicine, rent and food. Augusta is uneasy about the proposed bailout conditions:
“Of course, I’m worried about the future. They say, that until 2015 or 2016 there won’t be any improvement in the economic situation. So maybe we just should use leaves to cover ourselves: we’ll run around the streets barefoot just wearing leaves.”
A rise in VAT will have a real impact in poor people’s daily budget. There are also middle class families knocking on the door of the food distribution point at the church now. Filipa Sampaio Mineiro is from the Parochial Social Centre at Camarate parish in Lisbon. She says the kind of people coming to the food bank has changed:
“There’s now something we call new poverty. It’s lower middle class people, who didn’t need any help before that now do need help now. And the focus has shifted to these new people who need help.”
Elections will take place in early June. Left-wing parties are fiercely opposed to the austerity measures.
Many analysts agree that Portugal overspent on infrastructure and prestigious projects, such as high-speed trains and expensive concert halls. The bailout deal will include scaling down public investment.
Overspending has not just been a state problem according to debt counsellor Natalia Nunes:
“Both the private and public sectors, are facing serious debt problems. In 2011, the public sector was especially affected because of recent salary cuts.”
Porto in northern Portugal has been worst hit by the economic crisis. Officially, one in every four young people here is jobless. The real figures are supposedly even higher. Older people are also struggling to find work. Some of the street vendors along the Dohro river, like Monica Sa, are planning to emigrate:
“A solution might be to leave the country, get a job and try to start a new life somewhere else. I’m seriously thinking about doing this.”
Portugal’s industrial areas are littered with abandoned buildings. Closed production sites are are evidence of the main Portuguese problems: firstly, a lack of competitiveness and, secondly, bad timing. Portugal’s political and economic decision-makers realised too late, that the country cannot compete with Asian and African countries when it comes to low-labour-cost products, such as cheap shoes and T-shirts.
When the EU took in the central and eastern european countries, Portuguese workers came up against the cheap labour force offered there.
Joining the euro-zone was another tough task for the fragile companies. Being part of a hard currency area makes exporting more difficult for industries with low competitiveness. Some made it, but many didn’t and had to give up.
What is being called ‘restructuring’ is not over yet, as the president of the Portuguese textile association, Joao Costa, reminds us:
“In this industry, there was a very big cut in the number of workers last year. In 1990, Portugal had 300,000 direct workers in this sector – now we have about 165,000 workers. As time goes by, the decrease in numbers will continue, but not at such a big rate.”
Former textile worker Fernando Gomes is called “our hero” by his colleagues. For decades, he fought for rights and redundancy payments for thousands of laid-off workers. Fernando knows all about the bankruptcy cases in the recent history of Portugal’s textile industry:
“There are still thousands of people unemployed and they don’t receive aid from anyone. Portugal is like a ship without a captain. The politicians don’t really know where to go or even what they want.”
This is the place where Fernando worked, 20 years ago. Looking outside a broken window, today we see a huge area of Chinese-run warehouses, selling their import-textiles to customers all over Europe. The portuguese textile crisis worsened after 2005, when the protectionist European quota system on textile products faded out and cheap fabrics from China poured in.
Just one Portuguese outlet “survived” amidst the Chinese warehouses of Vila do Conde. What is the problem and what is the solution? José Araujo is the owner of the only Portuguese textile warehouse in Vila do Conde:
“Our problem is directly linked to the European decision to let Asian products into Portugal without control. They are overwhelming Portugese textile production. The solution is to close the borders and to impose high import taxes on non-European products.”
His twin brother, Mario Araujo, agrees that Portuguese textile production should be protected:
“The level of taxes for Portuguese companies and Portuguese products should decrease and we should better control our borders on the ground, at ports and at airports.”
However, protectionist solutions are not popular with the EU. It is not in the interest of the Portugal’s market leaders either, such as Somelos, who sell their fabric worldwide, making good money even in China. Some companies moved production to Africa or Asia, keeping just designers and managers in Europe. Somelos still produces in Portugal. The company’s director, Mario Domingues, says:
“To compete only with low labour costs is impossible. You need to put more added value on our products and to promote the image of the textile industry of Portugal. That’s the future.”
The social climate getting tougher. In March, Portugal saw its biggest demonstration for many years, which was organised on Facebook. Joao Labrincha is the man who set up an event page and managed to get 300,000 people out on the streets protesting against unemployment. He thinks the EU mainly serves the export interests of big countries like Germany and France:
“I think it is very important to look at the past of the European Union – and to perceive how solidarity was important for the creation of the European Union. So I see the future of the EU, bearing in mind the past.”
A group of singing bikers took part in the demonstration too. They call themselves ‘Men of the Struggle’. This year the Portuguese public is sending them to the Eurovision Song Contest, hoping Europe will listen to this voice of protest. Their revolutionary song is called ‘The Struggle is Joy’.
‘Jel’ Nuno Duarte, who is part of the group, wants the song to have a big impact:
“It is a revolution of joy, it is an optimistic revolution. It is a non-violent revolution. It’s like a tsunami that will pass all over Europe we hope!”