Lawmakers from the coalition government approved the 2014 budget
proposal Tuesday in the face of fierce opposition from those
indignant at the prospect of a third straight year of austerity as
the country battles to avoid asking a second bailout.
The austerity measures, such as spending cuts and tax rises, pursued
by successive governments over the past few years, have hit living
standards in the country, pummeled the economy and sent unemployment
up to 16.3 percent.
But the country has little room for flexibility after agreeing a 78
billion-euros ($105 billion) financial rescue in 2011 when it almost
went bankrupt amid the debt crisis that engulfed countries sharing
the euro currency. Since then, Portugal's creditors have forced it
to enact the austerity in an effort to repair its public finances
and convince investors that Portugal can live within its means.
Finance Minister Maria Luis Albuquerque said Tuesday that austerity
must continue because "unfortunately we are still in a situation of
crisis and emergency which demands exceptional measures."
Under the three-year bailout program, Lisbon is supposed to resume
long-term borrowing in bond markets in the middle of next year. But
despite years of belt-tightening, Portugal's credit rating is still
classified as junk by the three main rating agencies, and the
interest rate on the government's benchmark 10-year bonds is still
hovering around the 6 percent mark — a level still considered as
expensive. The economy, meanwhile, has been in recession for most of
the past three years.
If investors remain wary about lending to Portugal, the country will
likely need more financial help — a development that could prolong
the 17-country eurozone's struggle to draw a line under its
protracted debt crisis.
Lawmakers from the two parties in the center-right coalition
government used their parliamentary majority to pass the 2014 budget
as all opposition parties rejected the plan. Several thousand
protesters gathered outside Parliament during the vote, which
follows a recent spate of strikes that has increased pressure on the
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The leader of the main opposition Socialist Party, Antonio Jose
Seguro, said the budget "overburdens the Portuguese with yet more
Government workers are targeted in the latest batch of cuts. Their
entitlements are viewed as overly generous by the bailout lenders —
the country's fellow eurozone members, European Central Bank and
International Monetary Fund.
Public employees earning more than 675 euros a month will have their
pay cut by between 2.5 and 12 percent and their pensions above 600
euros a month will be reduced by 10 percent on average. The cuts
will affect some 600,000 workers — about 80 percent of the
Also, their working hours will be raised to 40 hours a week from 35,
while their vacation days are reduced from 25 days a year to 22 —
the same as in the private sector.
And the retirement age for all workers will rise to 66 from 65 next
Critics of austerity say the strategy has backfired, compounding
Portugal's economic difficulties.
The European Commission forecasts the jobless rate will rise to 17.7
percent in 2014 from 17.4 percent this year. It predicts modest
growth of 0.8 percent next year after three years of recession.
Press; BARRY HATTON]
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