Pain bites into Portuguese life as crisis deepens

[April 09, 2013]  LISBON, Portugal (AP) -- Serving a frugal lunch in their kitchen not much bigger than a bathroom, Pedro and Elena Baptista spoon stewed chicken feet onto their boiled potatoes and leave the slightly meatier wings for their 12-year-old daughter, Vania, and 7-year-old son, Joao.

The Baptista family counts itself among the casualties of an unrelenting financial crisis that is squeezing the life out of some European Union economies, including Portugal. Pedro Baptista, a stocky 37-year-old, has found work as a part-time window cleaner but his wife Elena, 35, has been on welfare for almost a year after losing her job in a school canteen. Scraping by on a monthly household income of euro650 ($840) and constantly going cap-in-hand to charities and family members has sapped their confidence.

But Pedro is determined to stay positive. "Ups and downs are part of life. Things will improve," he says. "We just have to hold on."

Exactly how long is hard to say, however, as Portugal's prime minister warns his nation to harden itself for more austerity.

It seems that every time Europe's leaders appear to have contained the continent's 3-year-old crisis over too much government debt, it erupts again -- witness the recent woes in Cyprus. Across Europe, the long-held belief that the state will always provide for its citizens' well-being is vanishing.

In return for rescue loans, governments across the region are slashing spending and raising taxes. However, the austerity has a knock-on effect of choking the growth needed to pull countries out of their nosedive. Despite the acute hardship, Prime Minister Pedro Passos Coelho said Sunday that his government must cut even deeper. That's because the Constitutional Court last week struck down some austerity measures aimed at government workers and pensioners, denying the government more than 1.3 billion euros in anticipated savings.

Meanwhile, the debt crisis risks jumping from Cyprus to Portugal. The creditors who lent Portugal 78 billion euros in a bailout two years ago are demanding that the government prune spending by another 4 billion euros in 2014 and 2015. If Portugal doesn't comply, it could be denied the next installment of its bailout.

Portugal's ordeal has begun to send shivers across Europe, even as the pain becomes hard to bear at home. Pensioners, schools and government workers are in the crosshairs of the latest planned cuts. The austerity is destroying legions of small businesses. And charities say they are already struggling to cope with a deluge of calls for help.

Here is a walk through Portugal's austerity-battered society.

PENSIONERS:

Checking over her bank statement showing her monthly pension payment, Maria Luisa Cabral stared silently at the slip of paper. When she finally spoke, the 66-year-old former librarian's voice shook and tears welled.

"That's about 10 percent less each month," she said. "I just feel really angry."

Portugal's elderly have been hit hard by austerity. Taxes and cuts in previous years had already cut Cabral's income by 20 percent. This year, the government will take another bite out of pensions over 1,350 euros a month.

Public outrage greeted this year's tax hikes, which even the finance minister conceded were "enormous." As well as hurting pensioners, the hikes are costing many workers the equivalent of more than a month's pay.

Every month for 40 years, Cabral handed over part of her earnings for her state employee pension and calculated what she would have to live on after retiring.

"You deduct money all your working life on the assumption you'll be entitled to a pension at the end of it," Cabral said.

She reckons she'll now have to give up her life's little luxuries -- buying a book, for example, or going to a cinema or a concert.

Governments across Europe are finding it harder to meet their expanding pension payments. The portion of retired people across Europe is quickly expanding and stretching welfare budgets. For Portugal, the outlay on state pensions has risen to 14.5 percent of gross domestic product from 9 percent since 2000, according to the government. The bill is forecast to keep growing through 2020.

Pensioners point to numbers they say are more worrying: Almost 80 percent of the country's 1.7 million retirees have to get by on less than euro500 a month.

While pensions drop, the cost of living keeps going up. Sales taxes have risen sharply, including a hike to 23 percent from 6 percent on electricity; the center-right government has scrapped rent controls; payments to see a doctor in the national health service have risen, as has the cost of public transport; government help to buy medicine has shrunk.

Cabral and thousands of others have joined pensioners' lobby group Apre, created last October when the 2013 state budget was unveiled. Cabral says she felt compelled to act when she saw elderly people in stores furtively counting out coins in their palms to see if they had enough to buy what they needed. At pharmacies, she saw them asking -- embarrassed, in front of queuing people -- if they could pay for their medicine in installments.

"People are feeling (the crisis) in their gut," Cabral said.

EDUCATION:

The Camoes high school in Lisbon is one of the country's oldest and most prestigious. Its wrought-iron balconies and elegant patios with soaring plane trees recall the wealth and majesty of the Portuguese capital when the school opened at the start of the last century and Portugal still had an empire.

The school is named for Portugal's great Renaissance poet, and some of the country's most illustrious figures have studied in its thick-walled classrooms with tall windows, including the current president of the European Commission, Jose Manuel Barroso.

By 2013, however, the school is a vivid demonstration of what happens when austerity is heaped on austerity.

Broken windows, cracked walls, flaking paint, leak-stained ceilings are the new reality. Sunscreens hang off their hinges. The gardens around the school buildings are overgrown. The sports field is closed, its artificial surface cracked and weedy. Parents of the school's roughly 1,200 students have come in on weekends and holidays to patch up the classrooms and corridors.

An engineering appraisal last year recommended structural repairs. School director Jaime Joao shrugs when he recalls how the Ministry of Education reacted when he phoned them about it: "They said, we have no money."

Portugal stripped its education budget by more than 5 percent between 2010 and 2012, according to European Commission figures published last month, making it one of the continent's biggest belt-tighteners. Portuguese university presidents say that over the past two years some 20,000 fewer state scholarships were awarded to students, with about 55,000 granted this year. More downsizing is likely: The International Monetary Fund, one of the bailout lenders, has proposed getting rid of at least 50,000 teaching posts in coming years.

Teacher morale is another worry, Joao says. As civil servants who are subject to cuts in the government wage bill, teachers have seen their living standards decline sharply. In 2008, a typical high-school teacher might receive an annual net salary of around euro20,000, according to the National Federation of Education, which represents school and university staff. The same teacher now gets about euro16,500, it says.

Mario Nogueira, secretary-general of Fenprof, the national teachers' federation, says further cuts will only aggravate education problems.

"In all honesty I don't know where they can cut anymore," Nogueira said. "We're already down to the bone."

DOWN, DOWN, DOWN:

A lively neighborhood bookstore close to Lisbon's bullring hosted numerous book signings, poetry readings and art exhibitions in recent years. Last month, after it shut down, the owners posted a bitterly-worded sign in the window of the empty shop. It had to close, the sign said, because of the "savage impoverishment and vertiginous drop in purchasing power" witnessed in Portugal, which had brought a "brutal fall" in the store's revenue.

It's the knock-on effect of austerity. Family spending plunged by almost 7 percent last year, the national statistics agency says. That was only slightly worse than 2011, and it's depressing the economy which contracted by 3.2 percent last year. Unemployment is at a record 17.5 percent and is forecast to rise.

All around are signs the country is in a death spiral.

The Portuguese Association of Hotels, Restaurants and Similar Establishments says some 11,000 of its members shut their business last year when sales tax on food and drink jumped to 23 percent from 13 percent.

Sales of cement last year were the lowest since 1973 as construction ground to a halt. Boarded-up stores along main streets and in shopping malls are an increasingly common sight.

After one of the two biggest cinema chains in the country shut almost half its 106 cinemas, 212 of Portugal's 308 council areas have no movie house, local media reported. Almost 6,700 companies filed for bankruptcy last year, a 41 percent increase on 2011, according to a study by credit insurance company Cosec.

CHARITIES:

The Portuguese charity AMI -- International Medical Assistance -- was set up almost three decades ago as a rapid response organization for catastrophes abroad. Now the emergency is at home.

Before 2008, up to 8,000 people a year sought AMI's help in Portugal. In 2012, it was almost 16,000. In some places such as Porto, Portugal's second-largest city, the increase in people approaching the charity has been more than 250 percent since 2008. And some of the needy are university graduates.

Ana Martins, AMI's national director for the past 18 years, says people seeking aid used to ask for help finding a job or resolving social or family problems.

These days, they ask for food.

"I've never seen so many people in such a precarious situation, lacking so many basic necessities," she said. That includes families living in homes with no electricity or natural gas for cooking because the supply has been cut off due to unpaid bills.

AMI's assistance center in Olaias, a low-income Lisbon suburb of high-rise apartment blocks, is a 21st-century version of the soup kitchens seen in the Great Depression. Staff start serving lunch at 11.30 for dozens of people aged from 20 to over 60. From the way they devour their food, they look like they hadn't eaten breakfast.

Margarida Mendes, who has run the center since it was set up in 1994 to help homeless people, says her work has changed a lot in recent years. Now it's mostly families seeking support.

Her work, she says, can be distressing, and the most poignant episodes involve young children. Recently, a small child jumped up and down and screamed in delight when he saw a packet of cheap, plain cookies sticking out of the top of the family's monthly parcel of food aid. That small scene got to Mendes: "You think to yourself, What kind of country is this where that sort of thing happens?"

The Baptista family comes to Olaias to pick up food parcels. They contain cooking oil, cans of sausages, flour. It's not much, but it helps. They also get second-hand clothes and school books for their son and daughter.

The financial crisis capsized their lives. Just five years ago they were together pulling in euro1,600 a month -- close to the average income for a couple in Portugal. Today they live on little over a third of that.

"For us, the past year has been the hardest time of our lives," Pedro, the father, says in their small kitchen which doubles as a living room, though it has no sofa or armchairs.

Finance Minister Vitor Gaspar recently conceded that straightening out Portugal's finances will take decades and will require the sacrifices of a generation.

The Baptista family belongs to that generation.

[Associated Press; By BARRY HATTON]

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