Portuguese unemployment rate hits record high

Portugal’s unemployment rate hit a euro-era record high in the period July-September when the economy shrank for the eighth quarter in a row as the government sticks to commitments taken on with the IMF and the European Union in exchange for a 78-billion-euro bailout.

The figures were released as the country held a one-day national stoppage to protest the policies of the center-right administration of Prime Minister Pedro Passos Coelho.

The National Statistics Institute (INE) said the jobless rate in the third quarter climbed to 15.8 percent from 15.0 percent the previous three months and from 12.4 percent a year earlier. The number of people out of work rose 5.3 percent from the second quarter and 26.3 percent from a year earlier to 870,900.

The INE also reported that GDP shrank 0.8 percent on a quarterly basis in the period July-September after a decline of 1.1 percent in the previous three-month period. Activity has fallen in each quarter since the end of 2010.

Portugal is suffering from a milder strain of the Greek disease”

Passos Coelho said the government expected the jobless rate to rise, adding that the decline in the economy in the third quarter was in line with the government’s central forecast of a recession this year of around three percent. The prime minister predicted a shift in the economic cycle next year. “Unemployment is a process the country has to go through,” he said. “We knew unemployment was going to increase before seeing it decline,” he added.

"We are fulfilling a very tough adjustment process, not in order to show our obedience, but because this way we make our country recover," Passos Coelho said in a televised speech. "We have to lower our level of spending in line with our possibilities."

On an annual basis, GDP declined 3.4 percent in the third quarter after shrinking 3.2 percent the previous three months. The INE said domestic demand contribution to GDP was less negative in the quarter, as the contraction in investment slowed. The positive contribution of net external demand decreased significantly as exports slowed.

According to figures released Wednesday by Eurostat, the European Union’s statistics office, industry output in Portugal declined 12.0 percent from the previous month and was down 8.8 percent from a year earlier, the second-worst performance in the 27-nation bloc.

The jobless rate among those aged 15-24 climbed to 39.0 percent in the third quarter from 35.5 percent the previous three months and from 30.0 percent a year earlier.

Given the extent of economic crisis, the European Commission has given Portugal another year to bring its public deficit back within the European Union ceiling of three percent of GDP. It now has until 2014 to do so.

“Portugal is suffering from a milder strain of the Greek disease,” Bloomberg quoted Nicholas Spiro, managing director of Spiro Sovereign Strategy in London, as saying. “Even after the troika cut the government some fiscal slack, the outlook for GDP is extremely bleak. The credibility of the government’s fiscal consolidation program risks being undermined by the severity of the downturn.”