Portugal union warns of strife over tax hike

Reuters News
Posted: Sep 19, 2012 10:10 AM
Portugal union warns of strife over tax hike

LISBON (Reuters) - Portugal's second largest union wants a complete revision of tax hikes planned by the government and warned on Wednesday that social strife could rise because of the new austerity measure, bringing the country closer to the situation in Greece.

"For us, there has to be a complete revision of this measure," UGT union head Joao Proenca told reporters after meeting with the prime minister to discuss the measure. "That much sacrifice is not admissible."

Proenca said there would be another meeting of social partners - including unions and business groups - with Prime Minister Pedro Passos Coelho on Monday.

Proenca's position is important because his moderate union had so far accepted the necessity of austerity and agreed to labor market reforms demanded under Portugal's 78-billion-euro bailout by the European Union and International Monetary Fund.

Political uncertainty and the prospect of a breakdown in the country's political consensus surrounding the bailout has risen since the government announced on September 7 new tax hikes to meet fiscal goals under the bailout.

"In addition to increasing social strife in the country, the measure will bring us closer to the situation in Greece, and on top of that there is a serious risk ... that we return to a grave political crisis," Proenca said.

Passos Coelho met on Wednesday with the social partners, who have so far agreed with the austerity policy measures adopted since the country entered into its bailout plan last year. The latest tax hikes were unveiled without discussion with the social partners.

The government announced it would raise workers' social security contributions to 18 percent from 11 percent in 2013 and cut the same tax for companies to 18 percent from 23.75 percent.

The government has suggested only that it could "calibrate" the measure.

(Reporting By Axel Bugge and Daniel Alvarenga. Editing by Jeremy Gaunt.)