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Portuguese Strike Halts Trains, Shuts Lisbon’s Metro

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June 27 (Bloomberg) -- Trains in Portugal stopped running, Lisbon’s metro shut down and flights were canceled as the country’s two main labor groups staged a strike to protest government austerity measures.

Underground trains will resume at 1 a.m. tomorrow, according to a statement on the Metropolitano de Lisboa website. State-owned rail operator CP-Comboios de Portugal said services aren’t running. As of 12:30 p.m. in Lisbon, 37 arrivals or departures were canceled at airports in mainland Portugal, airport manager ANA-Aeroportos de Portugal SA said in an e-mailed statement.

Prime Minister Pedro Passos Coelho is battling rising joblessness and a deepening recession as he cuts spending and raises taxes to meet the terms of a 78 billion-euro ($102 billion) aid plan from the euro area and the International Monetary Fund. Coelho announced measures on May 3 intended to generate savings of about 4.8 billion euros through 2015 that include reducing the number of state workers.

A deeper recession and higher unemployment are “exacerbating social and political tensions and, in turn, testing the government’s resolve to continue with adjustment policies and reforms,” the IMF said in a report on June 13.

Volkswagen Plant

Volkswagen AG’s Autoeuropa car factory in Palmela, southern Portugal, which accounts for 1.3 percent of Portugal’s economy, halted production, according to an e-mailed statement from the plant on June 25. Galp Energia SGPS SA expected no disruption to supplies of its fuel products, said Pedro Marques Pereira, a spokesman at the Lisbon-based oil company.

The government also plans to review state workers’ pay, and their working week will increase to 40 hours from 35 hours starting this year, in line with the private sector.

The UGT and CGTP labor groups, which called today’s walkout, last staged a joint general strike in November 2011, six months after the bailout. A demonstration is scheduled to start at 2:30 p.m. at the Rossio square in central Lisbon, according to CGTP, which said workers at some town halls and hospitals are taking part in the strike.

“The country has not stopped,” Parliamentary Affairs Minister Luis Marques Guedes told reporters in Lisbon.

Unemployment Climbs

Portugal’s economy shrank for a 10th quarter in the three months through March as investment dropped and the government cut spending. The government projects gross domestic product will contract 2.3 percent this year before growing 0.6 percent next year. The jobless rate will climb to 18.2 percent in 2013 and 18.5 percent in 2014.

The government announced less-ambitious targets on March 15 for narrowing its budget deficit as it forecast the economy will shrink twice as much as previously estimated this year. It targets a deficit equivalent to 5.5 percent of GDP in 2013, 4 percent in 2014 and below the European Union’s 3 percent limit in 2015, when it aims for a 2.5 percent gap. It forecasts debt will peak at 123.7 percent of GDP in 2014.

To contact the reporter on this story: Joao Lima in Lisbon at jlima1@bloomberg.net

To contact the editor responsible for this story: Stephen Foxwell at sfoxwell@bloomberg.net

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