EC, ECB and IMF meet with social partners before setting bailout conditions
After three weeks of negotiations, the Prime Minister announced on 3 May 2011 that Portugal’s caretaker administration had reached an agreement with a mission from the EU, the European Central Bank and the International Monetary Fund for a three-year €78 billion bailout. Before agreement was reached, trade union confederation UGT and employer confederation CIP demanded that the Agreement on Employment and Competitiveness signed on 22 March 2011 should still be honoured.
Background
On 12 March 2011, Prime Minister José Sócrates proposed a new austerity plan, the fourth in a year, which involved cutting health and welfare budgets, freezing and cutting pensions, and increasing taxes. At the same time the government was negotiating with the social partners at the Standing Commission for Social Concertation (CPCS), a constituent body of the Economic and Social Council (CES), in order to reach an agreement on employment and competitiveness to include, among other measures, the reduction of severance pay in case of dismissals (PT1102039I). The aim of the government was to restore the confidence of investors and the European Union by meeting its debt obligations without the need for outside help.
The trade union confederations reacted strongly to the new austerity plan and the General Confederation of Portuguese Workers (CGTP) organised a major national demonstration on 19 March to protest against it, supported by thousands of workers. Such opposition did not prevent the General Workers’ Union (UGT) trying, at the same time, to continue negotiations for an agreement on employment and competitiveness. Whereas in October 2010, UGT had responded to the third austerity plan in the budget proposal for 2011 by breaking off negotiations at the CPCS (PT1010039I) and joining the CGTP in the November 2011 general strike (PT1010019I), UGT’s preference now was to sign an agreement at all costs.
On 22 March 2011, on the eve of the discussion of the austerity plan in parliament, the government reached a tripartite agreement (in Portuguese, 157.95Kb PDF) on employment and competitiveness with all the social partners, with the exception of the CGTP. Although the focus of this agreement was not the austerity plan (which has not been discussed with the social partners), the government had hoped to reinforce its position and legitimacy and to neutralise the parliamentary opposition to the austerity plan. However, on 23 March the parliament rejected the fourth austerity plan, and Prime Minister José Sócrates tendered his resignation. The opposition rejected the austerity measures proposed by the minority socialist government, which collapsed. Early elections were called for 5 June 2011.
Talks with social partners
On 6 April 2011, two weeks after the defeat of the austerity plan in parliament, the Portuguese caretaker administration led by José Sócrates announced that it would seek foreign financial aid. Subsequently Portugal became the third euro zone country (after Greece and Ireland) to ask the European Union and the International Monetary Fund (IMF) for a loan under the conditions of the European Financial Stability Facility (EFSF).
On 12 April a delegation of IMF officials arrived in Portugal to join the delegation of the European Commission (EC) and European Central Bank (ECB) to go over Portugal’s accounts and negotiate the terms for a loan, which could reach €80 billion. In addition to talks with the government and the opposition parties, the EC, ECB and IMF team announced its intention to have separate talks with the employers’ confederations and the trade union confederations. The bailout team was not able to include the two left-wing opposition parties, the Portuguese Communist Party (CDU) and the Left Block (Bloco de Esquerda), in discussions because they refused to take part in the talks. The social partners, however, all showed their willingness to take part in the consultation process, including CGTP. The first round of meetings with the EC, ECB and IMF delegation, hearing first the trade union confederations and then the employer confederations, took place one week after the arrival of the IMF. Following the meeting, the trade union and the employer confederations made statements to the press about their concerns and suggestions.
Trade union confederations’ concerns
After the first meeting with the IMF/EC/ECB delegation on 19 April 2011, the trade union confederations CGTP and UGT stated their main concerns about the potential bailout. The Secretary General of CGTP, Manuel Carvalho da Silva, said they had asked for an extension of the period to reduce the deficit to less than 3% at least until 2013, and expressed opposition to measures similar to those applied in other countries. He commented:
What we said is that we oppose clearly and unambiguously new austerity packages similar to those that have been applied in other countries and have been designed for Portugal.
The CGTP leader added that the union confederation had insisted on proposals that promote economic growth and avoid situations of social disruption, reaffirming its opinion that ‘austerity packages do not lead to economic growth’.
The Secretary General of UGT, João Proença, declared that his trade union confederation had advocated the implementation of the tripartite agreement for competitiveness and employment signed in March. UGT drew attention to the fact that the system of collective redundancy in Portugal is one of the most liberal in Europe. Furthermore, UGT emphasised the importance of maintaining the constitutional prohibition of dismissal without just cause. A UGT statement declared:
It is crucial that the country is united in these negotiations. We are negotiating with international institutions which present a very tough project; tough in relation to IMF requirements and also in relation to European Institutions, which are at the present strongly conditioned by national interests.
During the 1 May celebrations, CGTP and UGT focused on the ongoing negotiations and once again highlighted their concerns. During the celebrations CGTP called for a national demonstration on 18 May 2011 against austerity plans and for job creation, and against the interference of the IMF/EC/ECB in Portugal.
Employers confederations’ concerns
After the first meeting with the IMF/EC/ECB delegation on 20 April 2011, the employers’ confederations stated the main concerns they presented at the meeting.
The Confederation of Portuguese Industry (CIP) declared that it had alerted the delegation to the importance of the tripartite agreement on employment and competitiveness signed on March 2011, and stressed that such agreement is CIP’s starting point for the ongoing discussions. The CIP President, António Saraiva, emphasised the importance of implementing two elements of the tripartite agreement: the creation of a fund to finance dismissals which will be funded half by the state and half by business; and the cut in the value of severance pay from 30 to 20 days per year of work, and its limit to a maximum of 12 months. Other concerns expressed by CIP were ‘the functioning of justice, the financing of companies, the recapitalisation of firms, and the abolition of unfair municipal taxes’; all seen as conditions to help companies in their growth and internationalisation. Adding that the aim should be to increase exports to 40% of gross domestic product, the CIP President highlighted that the focus should be on decisions promoting growth and employment, as well as less and more effective state involvement.
The Portuguese Trade and Services Confederation (CCP) focused on the importance of creating tools to finance companies, adding that that this was more important than cutting wages or increasing taxes. The Portuguese Confederation of Farmers (CAP) declared that its priority was the financial support the state budget 2011 provides for agriculture, which the farmers do not want to lose. The president of the Portuguese Tourism Confederation (CTP), Carlos Pinto Coelho, stressed the potential of the tourism sector, saying:
(It) has capacity for growth, provided that policies for tourism growth are launched which may hire more people and produce more wealth … In the coming years, we want to increase by 50% the number of people who work in this area and double the number of tourism services on offer.
Further developments
On 3 May 2011, Portugal’s caretaker administration reached an agreement with the EU, ECB and IMF delegation for a three-year €78 billion bailout. Prime Minister José Sócrates hailed it as a good agreement. He emphasised that the measures it defines are essentially those of the fourth austerity plan defeated by the parliamentary opposition on 23 March, with more in-depth and detailed measures for 2012 and 2013 and a few new measures, setting goals for a more gradual reduction of the deficit; 5.9% of gross domestic product (GDP) in 2011, 4.5% in 2012 and 3% in 2013. In addition, the Prime Minister drew attention to the wide consensus underpinning the agreement, saying:
The measures envisaged for the labour market are based essentially on the tripartite agreement that we concluded in March with the social partners, with a number of developments mainly in areas already comprised in the agreement with the social partners, in order to preserve the balance in labour relations.
The detailed content of the agreement is to be revealed after meetings with the opposition parties, following which the social partners’ reactions are expected.
Maria da Paz Campos Lima, Dinâmia