Portugal May Be Next To Need EU Rescue Package

Striking unions in Portugal are protesting the government's austerity measures. Parliament is expected to vote on the plan Friday. Portugal is one of the European countries facing massive problems caused by its national debt. Many Portuguese are angered by the government's plans to freeze pensions and cut the wages of civil servants by five percent.

RENEE MONTAGNE, host:

There's one place where would-be air travelers aren't flying this morning: Portugal. That country is on strike. Workers are protesting the government's soon-to-be-announced austerity budget intended to keep Portugal's trouble economy from spreading its pain across Europe. Portugal could be the next country that needs the EU and the International Monetary Fund to rescue it. NPR's Phil Reeves is in the capital, Lisbon.

And Phil, what does a national strike look like from where you are?

PHILIP REEVES: Well, the boulevards and narrow cobbled alleys of this elegant European capital, Lisbon, are very subdued this morning. This has been a strike that's organized by two big trade unions. They've been billing this as the biggest strike in Portugal for years, and the city is festooned with these banners rallying people to support it. There's no subway this morning, no ferries are running in the river nearby, hundreds of flights are canceled.

MONTAGNE: Well, none of this would seem good for Portugal's economy, which is already troubled. Why a strike like this, a massive strike? Why now?

REEVES: Well, on Friday the Portuguese government's going to put its austerity program to the vote in parliament. It hopes this will reassure the markets that it's tackling its big budget deficit, which actually has been getting bigger recently, despite spending cuts. The government's cutting public sector wages and services, freezing pensions, increasing taxes; of course the unions and much of the public don't like this. The government's trying to convince international investors that Portugal won't need a big bailout like Ireland and Greece, but it's got a lot of problems here - you know, the highest level of unemployment since the 1980s, rigid labor laws, huge debts, and traditional industries like textiles and shoes that haven't kept up with competition from Asia. So along with Spain, Portugal's seen as the next weak link of the 16 nations that use the euro. That's pushed up the cost of borrowing for the government to what many think will prove to be unsustainable levels.

MONTAGNE: We have seen riots in Greece, we've seen anger in Ireland. How are the Portuguese reacting to all of this?

REEVES: Well, the Portuguese are famously phlegmatic, you know, a kind of low-key people. But they are pretty angry, as I found out, in fact, when I wandered the streets of Lisbon.

(Soundbite of roasting chestnuts)

REEVES: Silvina Rodrigues sells roasted chestnuts. She's been doing this in the same spot for 28 years. It's getting very hard to make a living, she says, yet she doesn't want to see her country follow Greece and Ireland by getting an EU-IMF bailout.

Ms. SILVINA RODRIGUES: (Through translator) From what I've heard, I think it would be a disaster if IMF were to come into Portugal. We can no longer be the poor ones in Europe and the helpless ones. We have to come together and between ourselves we have to find a way to fight through this. And we don't need and we shouldn't help of the European Union or having IMF here in Portugal taking over.

REEVES: A big plaza is close by with classical colonnades, a huge statue of an 18th century Portuguese king and an even larger arch. The cold, gray waters of the Atlantic Ocean are not far away. Portugal was once a nation of great seafarers. It had an empire with colonies in Africa, Asia and South America. Now it's the poorest country in Western Europe.

Rodrigues reflects on this ruefully.

Ms. RODRIGUES: (Through translator) Our forefathers were great men, and today, unfortunately, there are no more great men to do what they did.

(Soundbite of bells ringing)

REEVES: This is the Basilica da Estrela, a magnificent domed 18th century church. By the iron door an old man stands begging.

Maria Pimental has just dropped by. She works in the tourist industry. She's 69 but says she can't retire because she needs the money.

Ms. MARIA PIMENTAL: Since the euro (unintelligible), because life becomes too expensive.

REEVES: Do you think that Portugal should get out of the euro?

Ms. PIMENTAL: I think it will be worse.

REEVES: What is the answer, do you think?

Ms. PIMENTAL: If I could tell you the solution, I will be rich.

(Soundbite of protest)

REEVES: Not far away, a small crowd of men has gathered in the street. They're carrying flags. This is a vigil outside the prime minister's house. These are military men protesting spending cuts.

Among them is Paolo Amaral, an army private. He's 42 and has a wife who's unable to find a job. He says the government's efforts to dig Portugal out of financial trouble are hitting the poor harder than anyone else.

Mr. PAOLO AMARAL (Army Private): (Through translator) The working class in Portugal, we have contributed nothing. We are not the cause of the economic crisis that we're living right now. Even so, we are the ones who are suffering more. Why do we have to pay for something we are not the cause of and that we are not contributing to make worse?

REEVES: At the moment, of course, there's no plan to bail out Portugal.

MONTAGNE: What did you think would happen if Portugal got a big bailout?

REEVES: People here I'm talking to say that even if Portugal goes to the EU and IMF, there's no guarantee that that will work and get them out of the trouble they're in.

MONTAGNE: Phil, thanks very much.

REEVES: You're welcome.

MONTAGNE: NPR's Philip Reeves speaking to us from Lisbon, Portugal.

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