IMF-imposed Austerity and Forced Privatization in Spain and Portugal Lead to Protests

IMF Approves €26b Portugal Loan as Spain Protests Austerity

May 20, 2011

Reuters - The International Monetary Fund on Friday approved a €26-billion loan for Portugal to help the country recover from a debilitating sovereign debt crisis, saying it would immediately disburse €6.1 billion to ease investor concerns over the euro zone member's debts.

The IMF said in a statement that total financing to Portugal in 2011 will include about 12.6 billion euros from the IMF and another 25.2 billion euros from the European Union. The funding is part of a joint IMF/EU 78 billion euro ($110 billion) bailout package.

"The financing package is designed to allow Portugal some breathing space from borrowing in the markets while it demonstrates implementation of the policy steps needed to get the economy back on track," the IMF said in a statement.

The financial package was calibrated to allow Portugal to stay out of the market for medium -- to long-term bonds for slightly more than two years, IMF Mission Chief Poul Thomsen said.

Under the agreement, Lisbon will have to carry out steep spending cuts, raise taxes, reform its labor and justice systems, and embark on an ambitious privatization scheme.

"The Portuguese authorities have put forward a program that is economically well-balanced and has growth and job creation at its center," said IMF Acting Managing Director John Lipsky.

"It addresses the fundamental problem in Portugal -- low growth -- with a policy mix based on restoring competitiveness through structural reforms, ensuring a balanced fiscal consolidation path, and stabilizing the financial sector," he added.

The deal follows a 110-billion-euro package for Greece last May and an 85-billion-euro program for Ireland in November.

Portugal's arrangement is the first time a country has asked private investors not to sell down their holdings of bonds on a voluntary basis.

The leader of Portugal's opposition Social Democrats, Pedro Passos Coelho, warned on Thursday the country has no room for failure in meeting the austerity measures of the program.

The conditions included in the bailout are expected to contribute to a contraction in the Portuguese economy of 2 percent both this year and next.

"This is not going to be an easy program. There is going to be a difficult period of adjustment," Thomsen said.

The program addresses a lack of competitiveness among businesses in Portugal, he said. It sets a goal of achieving a deficit that is 3 percent of GDP by 2013.

"Even during the good years, before the crisis, Portugal was hardly growing," Thomsen noted.

Portugal's economy is expected to begin expanding again in two years, he said, adding that many of the initiatives are weighted heavily to the early phases of the reforms.

Poulsen said he believes political consensus behind reforms bodes well for the success of measures to reshape the Portuguese economy.

"It's quite striking how most of the key issues, not least on the structural reform side, have broad political support, which to me is one of the encouraging things," he said.

Socialists Ready to be Slammed in Spanish Vote

The number of Spanish youth protesting their government’s economic policies and the high unemployment rate amongst them, continue to climb. The anti-government protests are being held across key cities in the country like Barcelona, Madrid and Seville. Today Spain is holding its elections and was hoping to dispel the protesting that started 7 days ago. The government went as far as to place a protesting ban, which clearly was ineffective. Spain’s youth is especially disturbed by the 45% unemployment rate amongst them and the country’s overall rate of 21.3% unemployment. Spanish newspapers and other sources are putting the number of protesters across the country at 60,000. They are all united in demanding a better present and future with more job opportunities and a higher quality of life. The protesters, who have dubbed themselves ‘los indignados’ or the Indignant, are overall peaceful. - Number Swell as Spain’s Youth Continue to Hold Anti-Government Rallies on Day of Elections, Hispanically Speaking News, May 22, 2011

May 22, 2011

AP – Spain's ruling Socialists braced for stinging losses in regional and municipal elections Sunday as unprecedented street protests over the highest unemployment in the 17-nation eurozone refused to fade away.

The elections are a key test of how much the party's support has crumbled due to its handling of Spain's real estate collapse and its subsequent debt crisis, and are seen as a prelude to general elections next year.

A growing protest movement reflects the strong disillusionment felt by Spaniards toward both main parties and a political system they say that favors economic interests over ordinary people.

"My hope is that our leaders will react responsibly to the protests we've been seeing and learn how to spend with prudence on the things our society needs," said civil servant Inmaculada Alfaro, 54.

More than 34 million people were eligible to vote for seats in 13 of Spain's 17 semiautonomous regional governments and for more than 8,000 city halls nationwide.

"I call for, encourage and appeal for a responsible, big turnout in these May 22 regional and municipal elections in all of Spain," Prime Minister Jose Luis Rodriguez Zapatero said as he emerged with his wife from casting his ballot.

Voter turnout by 2 p.m. stood at 35.9 percent, 1.7 percent higher than in similar elections in 2007, the electoral commission said.

Polls indicate Zapatero's party could suffer the humiliation of losing historic Socialist strongholds.

The financial crisis has forced deep job cuts and left Spain burdened with 21.3 percent unemployment. The jobless rate among the young stands at 40 percent and a total of 4.9 million people are out of work in Spain, the highest number since 1997.

A large proportion of those who still have jobs earn just euro1,000 ($1,400) or less per month.

And there is little hope on the horizon for the rest of the year. Spain is forecasting limp growth of just 1.3 percent for 2011, but even the Bank of Spain says that prediction is optimistic.

Protest camps of mainly young people sprang up in cities around the country a week ago and swelled to tens of thousands of demonstrators who on Saturday defied a government ban on gatherings the day before an election.

The government did not act to disperse the demonstrators, including the largest group camped out in Madrid's central Puerta del Sol square opposite city hall. Protesters on Sunday voted to stay in that square until at least May 29.

Many said they had been inspired by pro-democracy uprisings in North Africa and the Middle East that had toppled long-standing and corrupt dictators.

Despite the likely losses for the Socialists, Spaniards are also clearly disillusioned with the opposition conservative Popular Party.

"Politicians like the ones here in Madrid that go around spending money on official cars only seem to care about their own careers and about going one better than the opposition," said salesman Joaquin Ribes, 28.

Madrid has been ruled by the Popular Party since 1995.