Portugal was brought to a virtual standstill by a general strike yesterday as unions challenged reforms introduced by the centre-right government in its effort to cope with the eurozone's spending and borrowing rules and the impact of European Union enlargement. The 24-hour stoppage, Portugal's first general strike in a decade, mainly involved public sector workers who say they are bearing the brunt of the austerity measures which are designed to bring the budget deficit back within the limit set under the eurozone's growth and stability pact. Whatever the complexity of the problems lying behind Japan's deflation problem, it is not too hard to look into the proverbial crystal ball and see how the future is likely to pan-out for some Euro-zone members. Faced with an inflation dynamic which makes them increasingly less competitive they are finding growth hard. At the same time an ageing population and escalating future pension liabilities mean they have a debt trap - they cannot try to stimulate growth by getting into debt because the future growth expectations, which would enable them to pay-off the debt, just are not there. Hence deflation is an ever present danger.
"Portugal is in danger of losing an important dimension of social solidarity and stability if the government goes ahead with these reforms," said Manuel Carvalho da Silva, general-secretary of the CGTP-Intersindical trade union federation, which called the strike. But António Bagao Félix, labour and social security minister, said the reforms were vital if Portugal was to compete successfully for export contracts and inward investment with the east European countries due to join the EU in 2004. The strike, which disrupted hospitals, schools and courts and brought public transport to a standstill, was mainly targeted at government proposals to replace about 80 labour laws with a single new code designed to increase efficiency.
Source: Financial Times