Bloomberg News

Portuguese General Strike Grounds Flights, Closes Metro

November 26, 2011

(Updates with rating downgrade in sixth paragraph, minister’s comment in 8th. For more on the euro crisis, click on {EXT4 <GO>}.)

Nov. 24 (Bloomberg) -- Portugal’s first general strike in a year grounded flights and shut Lisbon’s metro service as unions protested austerity measures agreed to by the government to gain an international bailout.

Lisbon’s metro will be closed until 1 a.m. tomorrow. Most flights departing from Lisbon and Oporto were canceled, according to the website of airport operator ANA-Aeroportos de Portugal SA. State-owned train operator CP-Comboios de Portugal says it expected serious disruption.

“The country cannot continue to regress and workers must not continue to be exploited as they are,” Manuel Carvalho da Silva, secretary-general of the CGTP labor group, said in comments broadcast by SIC Noticias television. “There is great participation” in the strike, he said.

The protest comes on the first anniversary of Portugal’s first general strike since 1988, which was held after the previous government announced austerity measures that failed to avert the bailout in April. Prime Minister Pedro Passos Coelho is imposing more spending cuts and tax increases to meet the terms of the 78 billion-euro ($104 billion) aid plan from the European Union and the International Monetary Fund.

The CGTP said workers at ports, some town halls and the post office, CTT-Correios de Portugal SA, are taking part in the strike. The government’s website said 3.6 percent of central- administration workers were on strike at 11:30 a.m. local time.

Fitch Downgrade

The yield on Portugal’s 10-year bond jumped 83 basis points to 12.14 percent at 1:45 p.m. in Lisbon after the country’s credit rating was cut to below investment grade by Fitch Ratings due to a rising debt level and weakening economy.

A demonstration was scheduled to start at 3 p.m. at the Rossio square in central Lisbon before a march to parliament.

“We understand and respect the right to strike but we are conscious that the situation that we find ourselves in will only be overcome by following a strict and demanding path,” Miguel Relvas, the minister for parliamentary affairs, told reporters in Lisbon. “The sacrifices that Portuguese people face today will be worthwhile in the future.”

At the heart of the protests are austerity measures that are hurting an economy where growth has averaged less than 1 percent a year in the past decade, one of Europe’s weakest rates.

Economic Forecasts

The economy will shrink 3 percent next year and may then expand 1.1 percent in 2013, the European Commission forecast on Nov. 10. Portugal’s jobless rate rose to 12.4 percent in the three months through September as the economy contracted for a fourth quarter. The government predicts unemployment will reach 13.4 percent in 2012 before starting to decline in 2013.

The government aims to trim the budget deficit to 5.9 percent of gross domestic product this year and 4.5 percent in 2012, less than half last year’s 9.8 percent shortfall.

To help meet the 2011 goal the government has announced a one-time Christmas income-tax surcharge. The 2012 budget would eliminate summer and Christmas salary payments for state workers earning more than 1,000 euros a month. Other measures pledged to creditors include a reduction in tax deductions and an increase in the value-added tax on some goods. Portugal will also allow private-sector working hours to increase by 30 minutes a day during the next two years.

‘Room for Negotiation’

“With this budget, workers were forced to call a strike,” said Joao Proenca, the head of the UGT labor group, which organized today’s protest together with the CGTP. “We want the strike to create room for negotiation,” he said on SIC Noticias.

Portugal aims to return to bond markets in 2013, even though borrowing costs have increased since the bailout was requested. The difference in yield that investors demand to hold Portugal’s 10-year bonds instead of German bunds reached a euro- era record of 10.8 percentage points on July 12 and was at 9.97 percentage points today, up from 5.11 when former Socialist Prime Minister Jose Socrates sought the rescue on April 6.

Debt will reach 100.8 percent of GDP this year and peak at 106.8 percent in 2013 before starting to decline, the government forecast on Aug. 31. Debt was 93.3 percent of GDP in 2010.

--With assistance from Anabela Reis and Henrique Almeida in Lisbon. Editors: Andrew Davis, Eddie Buckle

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

To contact the editor responsible for this story: Tim Quinson at tquinson@bloomberg.net


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