Portugal Plays By The Rules, But Economy Slumps

Enlarge this image toggle caption Sylvia Poggioli/NPR Sylvia Poggioli/NPR

The eurozone crisis has focused attention on debt-burdened Greece spiraling into decline. Meanwhile, Portugal is seen as the international creditors' poster-child for obediently slashing spending and welfare benefits.

Nevertheless, the Portuguese national debt continues to grow, and the country is mired in recession and soaring unemployment.

The Portuguese national character has long been identified with Fado music. Raquel Freire, an activist with the local Occupy movement, says the melancholy style helps explain decades of resignation.

"Fado was saying, we have a destiny — we are poor and humble," she says. "It is our tragic destiny, we cannot do anything against it."

But after months of deep budget cuts and tax hikes, Portuguese are beginning to react. A protest rally was organized by the largest trade union on Feb. 11, and the slogans echoed its leftist ideology.

Analysts were surprised by the huge turnout, the biggest in 30 years. People of all ages and professions vented their anger and impatience.

Costume designer Tania Marques, 33, says that times are so bad that she's thinking of going back to live with her parents in northern Portugal

"This is hitting the bottom line, this is too much," she says. "I have to stop dreaming and readjust my life."

Antonio Nabarrete, a 56-year-old schoolteacher, says the government has slashed his salary by 28 percent.

"We lost our salaries and you have young without employment, and you have old people without money," he says. "And so there is no future for a country like that."

Last May, Portugal received a $104 billion bailout from the European Union and International Monetary Fund, in exchange for deep spending cuts and structural reforms.

Enlarge this image toggle caption Patricia De Melo Moreira/AFP/Getty Images Patricia De Melo Moreira/AFP/Getty Images

While the budget deficit was cut by more than a third, the economy is rapidly shrinking, consumption has plummeted, and unemployment has soared to 14 percent. Among the young, it reaches 30 percent.

Signs Of Crisis

On the streets of Lisbon, the signs of crisis are everywhere: shuttered shops; homeless people sleeping in doorways; and more and more people begging.

One of the most striking images is near-empty vegetable markets that have become out of reach for the average family. After a decade of easy credit, Portuguese are scrambling to make ends meet.

Avenida da Liberdade is lined with elegant boutiques. But its wide sidewalks now host a flea market.

At one table, Anna Claudia, 42, displays dusty old objects she collects from friends. A single mother, she lost her job at a mobile phone company two years ago.

"Two, three, five years ago, you can buy a car, you can buy a house, you can buy everything, because the banks give you money," she says. "And then they cut everything -– chop, chop, chop: no jobs, nothing — and now it's impossible to live."

Unlike Greece, Portugal enjoys EU political support that Athens can only dream about. And yet, both countries' debt is rising. And this year, Portugal's economy will shrink as much as Greece's.

More and more Portuguese worry they're going to follow in Greece's footsteps.

Fears Of A Downward Spiral

Pedro Santos Guerreiro, editor of the financial daily Negocios, fears European leaders have lost control of the crisis.

"We have all reasons to fear that we may enter this debt cycle of Greece," says Guerreiro, "which is: Austerity brings more recession, which brings austerity that brings more austerity — and then you are eating your babies and your sons."

Occupy activist Raquel Freire says the austerity measures imposed by the European Union are sacrificing Portugal's next leadership generation.

"You are suiciding the most studied, most capable, the most well-prepared generation that ever existed in our country," Freire says. "All my friends are working in supermarkets, and they studied law, economics.

Like neighboring Spain and Greece, Portugal came out of a dictatorship less than 40 years ago.

And, as in the other countries, the first generation to grow up and be educated in a fully democratic system is paying the highest price for the eurozone crisis.