Last updated: November 14, 2012 8:22 pm

Portugal on strike ahead of budget vote

Portugal’s general strike comes ahead of a final vote in parliament on the country’s toughest budget in recent history, which will increase income tax by an average of about 30 per cent as the centre-right government struggles to comply with the terms of a €78bn bailout.

Pedro Passos Coelho, the prime minister, has insisted that the tax increases and plans for an additional €4bn in spending cuts over the next two years are essential to ensure Portugal meets fiscal consolidation targets agreed with international lenders.

In Lisbon, thousands of demonstrators marched to the parliament building, where deputies were debating the budget. Riot police charged after at least five people were injured by stones and bottles thrown by protesters and several arrests were made.

Marches and protests were held in another 38 cities and towns across the country. Union leaders called for a 10 per cent surtax on share dividends, a 0.25 per cent tax on stock market transactions and a crackdown on tax evasion as alternatives to what they described as the brutal income tax increases planned by the government.

Arménio Carlos, head of the communist-leaning CGTP-Intersindical, Portugal’s largest union confederation, said the 24-hour stoppage, the second this year, was one of the country’s biggest general strikes to date, with at least 50 per cent of public sector workers participating.

Ahead of Wednesday’s Europe-wide “day of action” against austerity, Mr Passos Coelho had said on Monday during a visit to Lisbon by Angela Merkel, German chancellor, that any renegotiation would represent a failure of the rescue programme and delay the possibility of Portugal regaining access to long-term debt markets.

Portugal’s central bank forecast on Tuesday that the economy would shrink by a further 1.6 per cent in 2013, the third consecutive year of recession, after contracting by an expected 3 per cent this year. Record unemployment, already close to 16 per cent, is forecast to continue climbing next year.

Separate data published on Wednesday showed a worrying rise in unemployment to a record 15.8 per cent in the third quarter compared with the April-June period, while the overall economy shrank 0.8 per cent.

Mr Carlos said austerity measures had caused the purchasing power of public sector employees to fall up to 30 per cent over the past two years and at least 10 per cent in the private sector.

Austerity measures were not only causing great hardship, he said, but were failing to reduce government deficits and lower public debts as intended because of their negative impact on economic growth and tax revenue.

Portugal and other bailed-out countries, Mr Carlos said, were suffering under a form of “financial colonisation”. He called on the government to renegotiate the terms of Portugal’s €78bn rescue package, including the overall amount, the interest rate and the repayment period.

Wednesday’s general strike grounded flights, disrupted ports, courts and government services, and left many schools and universities closed. Hospitals provided only minimal services, and public transport stoppages made it difficult for non-striking workers to get to work.

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