Photo Gallery: Strikes Bring Portugal to a Halt


Striking against Austerity Unions Shut Down Portugal Over Planned Cuts

Strikes have shut down public services across Portugal on Wednesday, as unions express growing public dissatisfaction about Portugal's tough austerity measures. Meanwhile, borrowing costs for Portugal are rising sharply amid market fears that the country could be next in line for a bailout.


Portugal's biggest unions are staging the country's biggest strike in over 20 years on Wednesday in protest over the tough austerity measures about to be imposed to tackle the country's debt crisis. As the minority Socialist government struggles to placate the markets' concerns that Lisbon could be next in line for a , the public and private sector unions have united in a day of industrial action.

Public services, including healthcare and transport, have been most affected. More than 500 flights have been cancelled and major ports paralyzed. All workers with Lisbon's Metro, the city's subway, joined the strike at midnight, though some buses are still in operation in the capital. Unions representing some 1.5 million workers called for the strike after the government announced another round of austerity measures to follow those imposed in May.

Prime Minister Jose Socrates has pledged to stay the course on deeply unpopular wage cuts and tax hikes to cut the massive budget deficit. And, on Tuesday, the main opposition party announced that it would not block the government's 2011 budget, paving the way for its adoption this Friday in parliament. The country's trade unions are opposing the planned cuts of around €5 billion ($6.85 billion), which include public sector pay cuts.

"It is unacceptable that workers are making all the sacrifices," Joao Proenca, leader of the UGT union, told the Agence France Press news agency. "We cannot accept that the first, second and third priority in Portugal is the deficit."

"It's the workers who are paying for the crisis, not the bankers nor the shareholders of big companies," 65-year-old pensioner Leandro Martins told Reuters.

Fears of Contagion

Following Greece's huge debt problem and Ireland's banking crisis , international investors are taking a far closer look at euro-zone countries' public finances.

Any hopes that Dublin's application for a joint bailout on Sunday from the European Union and the International Monetary Fund would soothe the market jitters have been dashed. There is concern on the markets that if Portugal is forced to apply for a bailout, pressure would also be increased on Spain, the EU's fourth-largest economy. Indeed, the specter of contagion is looming in Europe these days.

On Wednesday morning, the interest rate on 10-year Portuguese bonds broke through the 7-percent barrier, while 10-year Spanish bonds rose to 5.08 percent at mid-morning from 4.91 percent at the start of trading.

Traders are "looking for their next target," Emilie Gay, an economist at Capital Economics in London, told the Associated Press. She predicts that Lisbon is likely to have to ask for a bailout from the European rescue fund as soon as early next year, when it is due to start refinancing billions of euros in government bonds.

However, EU Council President Herman Van Rompuy has insisted that Portugal's problems are very different to those faced by Ireland at the moment, because its banks are well capitalized. Still, the state of the Portuguese government's finances remain a cause for concern. Although Portugal didn't experience a similar real estate bubble to that of neighboring Spain or Ireland, it has had stagnant growth for years and has borrowed huge amounts to finance its public spending.

The country's budget deficit for this year is expected to be 9.3 percent of GDP and the proposed harsh cuts are part of a government effort to reduce the deficit to the 3 percent demanded under EU rules for euro stability by 2013.

smd -- with wire reports