Lisbon mulls replacement of social security cuts | Business| Economy and finance news from a German perspective | DW | 24.09.2012
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Lisbon mulls replacement of social security cuts

The government of Portugal has signaled that it is willing to reconsider its planned social security levy hikes after massive street protests against the fee rise. Lisbon is now seeking alternatives to boost revenues.

Portuguese Prime Minister Pedro Passos Coelho on Monday started talks with trade unions and employers' representatives on alternatives to a planned increase in social security fees that had met with vociferous protests over the past couple of days.

The old plan entailed raising workers' social security contributions from 11 to 18 percent of their wages. At the same time, employers' contributions would have been cut from 23.75 to 18 percent in order to raise more state resources and make companies more competitive through lower labor costs.

But the proposal and other austerity measures had brought hundreds of thousands of people to the streets in the biggest demonstrations since Portugal became a democracy in 1974.

Tough negotiations ahead

Protestors had said the draconian budget cuts would paralyze the economy and send many more people into poverty.

But the prime minister's willingness to renegotiate the cuts met with a mixed response on Monday. The Council of State, a body advising President Anibal Cavaco Silva, emphasized the need to seek consensus over budgetary issues. But it warned that Portugal needed to honor agreements with the European Union and the International Monetary Fund (IMF), which expect Lisbon to cut its budget deficit after granting the country a bailout of 78 billion euros ($100 billion).

The head of the CGTP trade union confederation, Armenio Carlos, made it clear no more wage cuts would be accepted to replace the plan to raise social security contributions. The president of the employers' organization Confederacao Empresarial for his part argued that a tobacco tax hike could be a more acceptable alternative.

hg/tj (dapd, dpa)