Portuguese businesses attack austerity, urge U turn

Portuguese business leaders launched on Monday a strong attack on austerity conditions tied to the EU-IMF bailout of the economy, saying that they had failed and the government should change direction to save the country from “recession”.

Their condemnation of the policy and call for a change of direction came three days before a general strike.

The business leaders strongly criticised the budget rigour imposed by the European Union, the European Central Bank and the International Monetary Fund.

“The austerity plan for Portugal was a short-term response, applied as if it were the only one possible, but today given the results no-one can be so irresponsible as to defend it or even worse pursue it,” they said.

“It is urgent to change direction” and “it is necessary to urgently take measures to save the country from recession,” they said.

The strong words came from four employer confederations, the CIP representing industry, the CCP representing shops and services, the CTP for tourism and the CAP for agriculture.

Portugal is struggling to apply radical budget and economic reforms in exchange for bailout loans of 78 billion euros ($102 billion) agreed by the EU and IMF in May 2011.

But the programme has thrown Portugal into recession and the unemployment rate has shot higher than the government, and the EU, ECB and IMF had expected.

“The policy for correcting the budget remains centred on reducing internal demand, a crazy increase in taxation and an absence of financing for small and medium-sized businesses,” the organisations said, calling particularly for a revision of company profit tax.

The business leaders made their stand before the centre-right government, which is under increasing pressure from criticism, faces another general strike on Thursday.

The strike has been called by the two leading Portuguese union confederations to protest against the austerity policies.

On Monday, auditors from the EU, ECB and IMF began a technical review of progress on reforms in preparation for a regular quarterly audit due to begin on July 15.

On the Lisbon stock market, bank shares fell by up to 5.0 percent on Monday, pulling the main stock index down by about 3.0 percent.

This was against a background of concerns on many markets about weakness in the Chinese banking system, and particularly about an expected winding down of the easy-money policy by the US Federal Reserve.

This prospect has had the effect of pushing up borrowing costs on the bond market for many emerging economies and some countries under pressure in the eurozone.