Passos Coelho bows to popular protest over salary cuts

The Portuguese prime minister, the conservative Pedro Passos Coelho, surrounded by critics and under huge pressure due to massive street protests, has decided to abandon his decision to slash seven percent from every worker’s salary by raising social security contributions.

Overnight on Saturday, during an eight-hour Council of State meeting played out against a backdrop of thousands of protesters outside shouting “thieves,” the political body convened by President Aníbal Cavaco Silva issued a statement saying that “the government is prepared to study alternatives.”

For the moment, Passos Coelho’s administration will explore every available avenue to raise the extra income but will not raise citizens’ social security contributions but will instead target businesses. Passos Coelho, with a popularity rating in freefall, has become known in Portugal as Robin Hood in reverse. His allies, meanwhile, defend his policies as a driver to reduce unemployment.

“Improving cohesion”

The proposed salary cut, announced on September 7 in a solemn television address, led to uncontainable street protests that on Saturday September 15 saw 600,000 people swamp 40 city centers nationwide. Criticism from all sectors of society — the labor unions and businessmen, the Socialist opposition and even the CDS, a key ally of Passos Coelho’s party — also rained down on the increasingly fragile government. The media and the country’s economists were united in rejecting the proposal as unjust and inefficient.

The Council of State has asked the government to “make efforts to consolidate public finances with a view to improving employment and social cohesion.”

On Monday, according to several Portuguese dailies, the government will unveil its alternative to the salary cut. For Passos Coelho, the situation in Portugal — bailed out to the tune of 78 billion euros and under the watchful gaze of the so-called troika of the European Commission, the IMF and the European Central Bank — makes such decisions unavoidable.

What form the alternative will take is the source of much speculation. Some think bonus payments will be hit while others forecast rate hikes based on the modification of the tributary scales placed on personal income tax.