Portugal’s socialists have come under fire for proposals that would see pensioners pay for their plans to ‘turn the page on austerity’ if they are elected in general elections in the autumn.
“There is an alternative, it’s possible to turn the page on austerity and have better economic results,” Socialist leader Antonio Costa said, Reuters reported. This would be done, he added, “without sacrificing budget rigour, sustainability and seriousness of undertaken commitments”.
Opinion polls show the Socialists a few points ahead of the right-wing ruling coalition before the general election due in September or October.
The party’s plans cuts in workers’ social security payments, to 7 percent in 2018 from 11 percent now, then returning to that level via half-point annual increments in 2019-2026.
The measure, aimed at temporarily increasing disposable incomes that fell sharply after years of EU-imposed austerity in Portugal, would be offset by future pension cuts once the economy had recovered. Pensions to be paid after 2026 would be cut by up to 2.6 percent.
To stimulate investment and hiring, the Socialists propose a gradual cut in social security contributions by companies by 4 percentage points in 2016-18 from the current 23.75 percent.
That would replace corporate tax cuts of 4 points planned by the current administration in the same period, and the saved tax would be used to finance the social security system, along with a new tax on inheritance worth more than 1 million euros and penalties for companies with excessive personnel rotation.
Tax surcharges and public sector salary cuts imposed by the previous government would be eliminated, and value-added tax for restaurants would be cut to 13 percent in 2016 from 23 percent.
600 million euro pension cut
However, Catarina Martins, spokesman for the radical Bloco de Esquerda said:
“It is unacceptable for the Government to say that there will be relief from austerity, because it will cut 600 million euros in pensions. The three million people in Portugal who are over 60 are citizens like everybody else, and therefore, if there is more austerity for pensioners, there is more austerity for the people. ”
Bloco de Esquerda argues that Portugal’s older generation have already suffered heavy cuts imposed by the government under the Troika’s Memorandum of Understanding agreed by both the Socialists and right-wing Socialist Democrats ahead of the 2011 general elections that saw the former ousted by the latter, in coalition with the conservative People’s Party.
Pensioners have seen cuts in subsidized access to health and transport, “making it difficult to get to the end of the month,” said the Bloco MP.
The attack on pensioners was doubly unfair and economically illiterate too, Bloco suggested. “In a country where there are no life chances for the younger generation, the older generations help their children and grandchildren,” said Martins. “No one lives better [in Portugal] if your parents or grandparents live worse.”
But the Socialists were also accused of failing to address to key issues that were essential to ending austerity, : the restructuring of public debt – the third highest in Europe after Greece and Italy – and the country’s exit from the EU’s draconian ‘balanced budget’ fiscal compact treaty, which came into force January 2013 in the 12 EU countries that signed up to it.
Austerity impact
Portugal’s debt is anticipated to hit 124.2% of GDP this year and is set to remain above 100% of GDP through to the end of 2019. Meanwhile, unemployment will average 13.2% in 2015, falling to 11.1% in four years time. Youth unemployment is at almost 40 percent, which, the going rate for college graduates at about 600 euros a month has got foreign multinationals flocking to the country, to profit from of the abundant cheap labour.
The impact of current austerity policies in Portugal was captured in a new Caritas Europe report which found the country was among the seven countries in Europe that has registered the largest increase in the risk rate of poverty and social exclusion in 2013. This, thanks to cuts to the national health service budget of about 15% less than in 2010 and a 30% cut in spending in support of families with children, leading to a child poverty rate of 24.4% in 2013.
The report found that austerity cuts in Portugal and elsewhere in Europe had “disproportionately” affected lowest income groups; “many children life opportunities [that] are weakened by the combined effects of precarious work situations (their parents), cuts in benefits and reductions in essential services.”
Portugal’s communists have taken a similarly dull view of the Socialists’ proposals and back the alternative exit from austerity outlined by the Bloco.
In the 2011 elections the two radical parties secured 13% of the vote between them, with opinion polls confirming that level of support.
The CGTP trade union, the country’s largest, has also weighed in against the socialists, criticising the proposed cuts to social security contributions for undermining the country’s already weak welfare system. Many of the party’s proposals “follow the same line of the current government policy,” said general secretary Arménio Carlos.
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