Portuguese strike against austerity; debt lowered to junk

Nov 24, 2011, 14:47 GMT

Lisbon - Portuguese workers Thursday staged a general strike against the government's austerity policies, even as those spending cuts earned praise from ratings agency Fitch, which termed them an effective strategy against the country's economic crisis.

The agency nevertheless downgraded Portugal's credit rating to junk level, lowering it to BB+ from BBB-.

Thousands of demonstrators marched through central Lisbon to protest the measures. There were clashes between protesters and police in front the parliament that left some injured and resulted in at least three arrests.

Trade union leader Manuel Carvalho da Silva said 'a very high' number of people heeded the strike call. But the government put the number of public administration employees participating in the strike at only 3.6 per cent.

He said there had never been a strike in which so many sectors had participated and called on the government to put an end to 'exploitation and impoverishment.'

Train and bus traffic was greatly reduced, the Lisbon underground was closed, and ferry traffic over the River Tagus came to a halt, according to media reports.

The Portuguese airline TAP cancelled 121 of its 140 scheduled flights, offering passengers alternative dates. Airlines would only operate 36 out of a total of 109 flights scheduled between Spanish and Portuguese airports, the airport authority AENA said in Madrid.

Although the Portuguese strike mainly paralysed the transport sector, it also affected schools, hospitals, courts and garbage collection, according to media reports.

The 24-hour strike was called jointly by Portugal's two top trade union confederations, the communist CGTP and the Socialist UGT, to protest Prime Minister Pedro Passos Coelho's austerity policies.

Passos Coelho is trying to cut the budget deficit from 9.8 per cent of gross domestic product in 2010 to 4.5 per cent in 2012.

Parliament recently passed a budget slashing spending on health and education by about 10 per cent, cutting the earnings of many active and retired public employees by about one-seventh annually, and lengthening the legal working hours by half an hour.

The policies follow guidelines agreed with the European Union and the International Monetary Fund, which granted Portugal a bailout of 78 billion euros (105 billion dollars).

The austerity policies did not prevent Fitch from downgrading Portugal's credit ratings, quoting fiscal imbalances, high indebtedness and a recessive economy. The ratings agency expects Portugal's GDP to contract by 3 per cent in 2012.

However, Fitch also praised Passos Coelho's austerity policies, saying the budget was well-designed and that it was possible for Portugal to meet its deficit-reduction target.

'Portugal's downgrade goes to show how hard it will be for troubled economies to pull themselves out of the crisis and how long this will take,' said Sony Kapoor, head of the London-based economic think tank Re-Define.

The austerity has come under widespread criticism in Portugal, where unemployment stands at about 12 per cent and poverty is spreading.

'It is vitally necessary to block the road the country has taken,' CGTP leader Carvalho da Silva said.