Oct. 8 (Bloomberg) -- Portuguese Prime Minister Jose Socrates will face the country’s first joint general strike in 22 years as the two biggest labor organizations prepare to protest against the government’s austerity measures.
The UGT and CGTP groups agreed to call a general strike for Nov. 24, a date proposed by CGTP on Oct. 1. The last general strike by both labor organizations was in 1988. CGTP called a general strike without UGT in 2007.
“The country is living a difficult situation,” UGT Secretary-General Joao Proenca said yesterday at a news conference in Lisbon broadcast by television station SIC Noticias. “But it’s not possible that sacrifices are demanded always from the same people.”
Portugal plans to cut the wages of state workers and raise taxes to convince investors it can narrow the euro region’s fourth-biggest budget gap after Greece’s debt crisis led to a surge in borrowing costs for high-deficit nations. Greece and Spain have also faced strikes and protests as their governments try to push through measures to cut their budget shortfalls.
The government on Sept. 29 announced additional fiscal measures for 2011 that Socrates said will reduce spending by 3.42 billion euros ($4.75 billion) and increase tax revenue by about 1.7 billion euros. The plan includes a 5 percent cut to the wage bill for public workers earning more than 1,500 euros a month, a freeze on hiring and an increase in the value-added tax rate to 23 percent from 21 percent. Finance Minister Fernando Teixeira dos Santos said the cuts were “painful.”
“If there is a strike that has a strong significance for future generations, this is it,” said Manuel Carvalho da Silva, secretary-general of CGTP.
Since Teixeira dos Santos announced the additional measures, the extra yield investors demand to hold Portugal’s 10-year debt instead of German bunds, Europe’s benchmark, has narrowed to 401 basis points yesterday from a record 441 basis points on Sept. 28.
Europe’s sovereign debt crisis took hold at the end of 2009 after Greece’s newly elected socialist government said the budget deficit was twice as big as the previous administration disclosed. In April, Greece asked to tap an EU-International Monetary Fund 110 billion-euro loan facility after being shut out of debt markets. The EU then passed a broader 750 billion-euro backstop for the rest of the euro region.
Portugal’s government is seeking to cut the budget gap from 9.3 percent of gross domestic product in 2009, the fourth-highest in the 16-nation euro region after Ireland, Greece and Spain, to 7.3 percent this year and 4.6 percent next year. It aims reach the European Union limit of 3 percent in 2012.
The cuts may hurt an economy that has barely grown for a decade, with expansion averaging less than 1 percent annually since 2000.
The Bank of Portugal yesterday said that the economy may stagnate next year as the government cuts spending and export growth slows. The projections don’t take into account the deficit measures announced on Sept. 29, the central bank said.
Jorg Decressin, head of the International Monetary Fund’s world economic studies division, on Oct. 6 said that GDP may contract 1.4 percent next year because of the fiscal tightening. The IMF had forecast stagnation in 2011 before the announcement of the additional measures.
Standard & Poor’s also sees the economy shrinking next year. It said on Oct. 4 that the country is unlikely to default on its debt even as the economy fails to grow over the next two years.
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