New Portugal Government To Deal With Economy

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The people of Portugal vote in an election Sunday to choose a new government to replace the one that collapsed over its unpopular austerity program. Portugal is deeply in debt, and has promised to make unpopular changes in welfare and labor policies in return for a massive bailout by the IMF and the European Union.

RENEE MONTAGNE, host:

We're going to hear now about one of the European countries where economic problems have led to political turmoil. Portugal is deeply in debt and the government has collapsed because of its unpopular austerity program. On Sunday, voters will choose a new government that will inherit those difficult circumstances. The new leadership will have to make unpopular changes in welfare and labor policies in return for a massive international bailout of $112 billion.

NPR's Sylvia Poggioli is in Lisbon and joins us now to sort this all out.

Good morning.

SYLVIA POGGIOLI: Good morning.

MONTAGNE: Now, if the bailout has already been arranged, Sylvia, it sounds like the country will have to tighten their belts whoever wins. So what is this campaign all about?

POGGIOLI: Well, here in the streets of Lisbon, it would seem that only extreme leftist parties are running since they're the only ones that have put out campaign posters, and these leftist parties are opposed to the terms of the bailout. For example, the slogan of the Communist Party is very direct: we won't pay.

But the real race is between the center-left Socialist Party that was in office until last March, and the center-right party, which, to make things confusing for all of us, calls itself the Social Democrat Party. Both major parties have carefully avoided discussing the terms of the $112 billion bailout during the campaign and it's pretty clear why. The requirements are going to be very tough; sharp cutbacks in public spending, higher property and consumer taxes and reforms of the justice and labor systems, including much less generous unemployment compensation. And it's an echo of what we've already heard in Greece, Spain and Ireland, all eurozone countries that are in very deep debt.

MONTAGNE: Well, you were in Spain last week where city squares were occupied for days by young demonstrators protesting the dire state of that economy. Are similar protests going on there in Portugal?

POGGIOLI: Not now. But last March there was the first of these new type of peaceful youth protests. And it was that demonstration that inspired the Spanish version and the one that's taking place in Greece these days. Here they call themselves the generation in trouble and these young people continue to mobilize on social networks and websites. Here in Portugal, like in Greece and Spain, the major victims of the crisis are the young.

A youth unemployment in Portugal reaches nearly 30 percent. That's not as high as the 45 percent figure in Spain, but it's still a very high percentage in a country with a population of some 10 million people. And in all of these, three of these Southern European patriarchal societies in Portugal, in Spain and in Greece, the welfare state model seems to have been designed more for middle-aged and elderly, not for the young. They have no safety net at all, and if they do have jobs, they are mostly on temporary contracts with no social benefits. In fact, they call themselves the precarious ones.

So in all these three countries, there's this paradox that the best educated generation ever is going to pay the biggest price and is probably destined to live less well than their parents or be forced to leave the country for better opportunities elsewhere.

MONTAGNE: And in Portugal where you are now, that country has already undergone three austerity plans in the last two years. Just two things; can, I mean is there any possibility that they can avoid another one? And what impact have these previous plans had already?

POGGIOLI: Oh, they can't avoid another one, not at all. So far already, the government workers have lost five percent of their salaries this year. Pensions were frozen and public spending has been sharply reduced. And this country, which is already Europe's poorest, is experiencing a widening gap between rich and poor. But apparently that's not enough. Under the terms of the bailout, which will be handed out by the International Monetary Fund, the European Union and the European Central Bank, Portugal must cut its budget deficit more than three percent in just one year, and this is causing great anxiety. And the media has very strongly criticized the terms of the plan.

Some analysts say how will it be possible to cut deficits and at the same time have an economic recovery to pay back the debt and undergo such tough austerity measures while the country is mired in recession?

MONTAGNE: All right. Thanks very much, Sylvia.

POGGIOLI: Thank you.

MONTAGNE: We've been speaking with NPR's Sylvia Poggioli, who's in Lisbon to cover elections there on Sunday.

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MONTAGNE: You're listening to MORNING EDITION from NPR News.

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