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So now the previously well-behaved and compliant Portuguese are protesting in the streets over their government's austerity plans:
The turning point came in September when Mr. Passos Coelho offered a plan to redistribute social security funds by cutting employers’ social security taxes while significantly raising those of employees. Although the measure was meant to lower labor costs, the outcry from workers was so ferocious that he was soon forced to withdraw it.
But the damage was already done. The misstep is now credited with having rattled the social and political cohesion that had underpinned Portugal’s painful but steady progress.
The withdrawal of the tax plan left the Portuguese, who had once grudgingly accepted the pain of austerity, with a new sense of empowerment, Mr. Magalhães said. “The fact that the government backed down and the fact that no catastrophe or international censure came out of it suddenly shows that there are no inevitabilities,” he said.
Pay attention, will you, people? We may need this sooner than you think.
[...] Mr. Vieira Lopes suggested that the fundamental problem was that the bailout assistance program from Portugal’s international lenders did not take sufficiently into account the specifics of the nation.
“The austerity model has been applied rather mechanically,” he said. “This is not a country full of big companies that can adjust to a decline in their domestic market, but rather small and medium-sized companies whose only option is then to close down.”
Many stores in downtown Lisbon are now either closed or advertising huge discounts, as citizens struggle in a deepening recession that has pushed unemployment to a record 15 percent. A sharp rise in the sales tax has decimated the restaurant sector. One measure of the hardship has been the sudden proliferation of the “marmita,” or lunch box, used by employees to take their home cooking to work. Even the investment banking division of Banco Espirito Santo, one of Portugal’s largest financial institutions, recently refitted a room with tables, refrigerators and microwaves to accommodate the trend.
As consumer spending is declining, so too are tax revenues. As part of its 2012 budget, the government anticipated that sales taxes would produce revenues 11.6 percent higher than in 2011. Instead, revenues were down 2.2 percent in the first eight months of this year, as the tax increases suffocate the economy.
Imagine. Apparently leaving people without any money to spend depresses tax revenues and contracts the economy! Who would have guessed?
10th Anniversary Fundraiser: