Portugal expected to stick with austerity government

Leftist candidate Marina Mortagua with fellow socialists standing on a pro-migrant platform. Picture: Getty

Pay and pension cuts, steep tax increases, and deep reductions in public services were introduced after Portugal’s €78 billion (£58bn) bailout in 2011.

That rescue averted the bankruptcy that loomed during the eurozone financial crisis as lenders cut off credit – scared away by Portugal’s massive debts following years of government overspending.

“We had to have austerity. How else could we set things straight?” Justino, a 79-year-old former dental lab technician, from Lisbon said. “I had to adapt. We all did.”

The government is roughly level in polls with the Socialist Party, the main opposition force. Both say they will abide by the eurozone’s financial discipline.

The Portuguese people took a sober look at their country after the years of spending and concluded austerity was inevitable, according to Joao Cesar das Neves, an economics professor at Lisbon’s Catholic University.

Widespread discontent with austerity measures had brought mass street protests. The government admitted its income tax hikes were “enormous.” A further 3.5 per cent surtax on pay and an increase in sales tax from 13 to 23 per cent were painful but necessary, it said.

Prime minister Pedro Passos Coelho has pointed to the fact the economy grew 1.5 per cent in the first half of this year compared with the same period a year ago. The unemployment rate, which reached a record 17.7 per cent in 2013 and has hit the young hardest, has continued to drop, falling to 12.3 per cent in July while consumer confidence has also grown.