Unions set to strike over 2012 austerity budget plan

Plans for another stringent budget in Portugal have prompted unions to call for a general strike. Proposals by centre right coalition PSD-CDS for the 2012 budget are harsher than those requested by the IMF, the ECB and the EC. They include further cuts in public spending and social security, while capital profits remain almost untouched. Trade union confederations CGTP and UGT have called for a general strike on 24 November, on the eve of parliament’s final vote on the budget.

Background

During the country’s election campaign in June 2011, the Social Democratic Party (PSD) and the conservative Popular Party (CDS) promised to go further than the Memorandum of Understanding (211Kb PDF), agreed with the then government of the Socialist Party (PS), the European Commission (EC), the European Central Bank (ECB) and the International Monetary Fund (IMF) (PT1105019I). As soon as the PSD/CDS coalition came to power on 21 June 2011, they clearly showed their intention to comply with the agreement (PT1107039I; PT1107029I). On 10 October 2011 the new prime minister, Pedro Passos Coelho, said the 2012 state budget would be ‘the most difficult to close and implement in living memory'. On 13 October, the cabinet approved the preliminary document for the 2012 budget, Proposta para o Orçamento de Estado de 2012 (123Kb PDF) and on the same day the prime minister went on television to outline the measures designed to meet the terms of a €78 billion bailout, and the target demanded by the Troika (the IMF, the ECB and the EC) of reducing Portugal’s 9.1% 2010 budget deficit to 3% in 2013. Pedro Passos Coelho said the country was experiencing a national emergency and said the adjustment process to this would have to include more stringent measures. He added that it would be necessary to exceed the bailout requirements because of an unexpected budget shortfall.

Measures include:

  • temporary suspension of thirteenth and fourteenth-month bonus salary payments for civil servants and pensioners who earn more than €1,000 a month;
  • employees in the private sector having to work half an hour more per day;
  • a rise in VAT for some new products and services;
  • health and education budgets to be slashed.

The government delivered the 2012 budget proposal to parliament on 17 October 2011.

Budget goes further than agreement

The proposals to cut the budget go nearly half as far again as that requested by the memorandum. It required a €4,506 reduction in government expenditure in 2012. However, the government says it has to make cuts of €7,460 million (€2,954 million extra). The memorandum also asked for increased taxes, to boost Government revenue to €1,535 million. However, the budget proposals have increased this by 88.3% to €2,890 million (€1,355 million extra).

Cuts in public spending

The proposed public spending measures include cuts in:

  • jobs;
  • wages;
  • bonuses for employees in the public sector (which will represent savings of €2.640 million, or 35.4%);
  • pensions (they are being frozen, but will be cut in real terms by €628 million);
  • bonuses for pensioners in the public and the private sector (a saving of €1,260.2 million);
  • the education system (€224 million);
  • health system (€1,000 million);
  • social benefits (unemployment and others) by €178 million;
  • public investment (€923 million).

The 2012 budget proposal also abolishes annual bonuses for public-sector workers and also for pensioners (public and private sector) earning more than €1,000 a month for the next two years, the period covered by the memorandum. These bonuses are usually worth two months’ wages, the thirteenth month a Christmas bonus and the fourteenth month a holiday bonus. Those who earn between €485 (the minimum wage) and €1,000 a month, will have one of their bonus salary months cut. It is estimated that this will mean 660,000 public-sector employees experiencing a 14% reduction in pay in 2012. During 2011, public-sector workers earning more than €1,500 had their pay cut on average by 5% (PT1010019I).

The bonus cuts were not asked for in the memorandum and there is huge controversy over them. Critics say they are illegal and do not respect the constitutional norms regarding acquired rights; they are also arguing that the cuts in public sector wages discriminate against public-sector employees.

Tax proposals

Regarding tax, the government plans to:

  • reduce the amount that can be deducted for health and education expenses in personal income tax, which is expected to bring in an extra €379 million;
  • increase tax on personal income for pensioners (€115 million);
  • increase VAT revenues (€2,044 million, as against the memorandum’s planned increase of €1,085 million).

In contrast, the tax on capital gains will increase only from 20% to 21.5%. The revenue from this measure is estimated only at €3 million, since the overwhelming majority of gains obtained by the main economic groups remain exempted (capital interest, dividends and capital gains). Tax benefits on Madeira offshore continue to be granted and will represent in 2012 an income of €1,186.9 million.

Increase in working hours

The government says that, to promote economic growth, it plans to increase private sector working hours by half an hour per day without extra pay (another measure not envisaged by the memorandum), and to reduce the number of public holidays.

Trade union confederations call for a general strike

Unions reacted strongly to the proposals, with the General Confederation of Portuguese Workers (CGTP) and the General Workers’ Union (UGT) calling for a general strike.

Manuel Carvalho da Silva, Secretary General of CGTP, said:

The measures presented are extremely serious for the workers and for the country, leading to intensified exploitation and impoverishment…in addition to injustice, hardness and violence, the measures exacerbate the crisis causing more recession and more unemployment.

Mr da Silva added that the proposals violate fundamental constitutional rights, including the right to collective bargaining. He particularly criticised the planned cuts for the public sector, saying they would lead to employees losing almost a quarter of their income in the next two years. He also said the measures targeting pensioners would increase the risk of them falling into poverty. And he rejected the 30-minute unpaid increase in the working day.

João Proença, Secretary General of UGT, expressed similar concerns, declaring:

The budget proposal surpasses all the predictions of UGT. We know that we live in difficult times where the Portuguese are asked to make sacrifices in respect of the commitments to the EU and IMF to meet the deficit target. But we have always contended that sacrifices should be distributed fairly, be balanced and promote growth and employment. The measures proposed are not fair, nor balanced and they do not promote growth and employment.

Mr Proenca added that the measures would lead to growing inequality by increasing taxes and reducing expenditure at the expense of workers and pensioners. He added that the increase in working time was unacceptable, recalling that only in 1996 had weekly working time been reduced to 40 hours. He predicted that the proposals would lead to an increase in unemployment, with unemployment rate reaching 14%–15%. He said the proposals were ‘hasty decisions guided by panic’ and attacked the government mindset as being ‘I can, I want, I order’. Instead, he emphasised the need for tripartite social dialogue, collective bargaining and workplace participation.

The unions decided unanimously to call a general strike on 24 November. Parliament’s final debate and vote on the budget proposals will take place on 23, 24 and 25 November.

Commentary

CGTP and UGT agree with the statement of the European Trade Union Confederation (ETUC), on 16 May in Athens, which argued that:

Interest rates should not be higher than those with which the banks refinance themselves with the ECB … deadlines should be extended and … the goal of 3% deficit should only be achieved in 2016/2017.

CGTP has been arguing against the terms and the goals of the memorandum, pointing to the need for an immediate renegotiation of the debt, its interest and deadlines, in order to avoid further recession and an increased risk of unemployment and poverty. UGT has been more cautious about the memorandum’s requirements. It emphasises the importance of respecting the commitments with the EU and IMF, in order to be able to renegotiate the extension of the deadline and interests.

In this light, UGT’s decision to act with CGTP against the budget proposals might be seen as a reaction to the extreme austerity and unrealistic demands as set up in the budget proposal, which are even more severe than those in the Memorandum of Understanding of May 2011.

Maria da Paz Campos Lima, Dinâmia

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