Government backs off, for now

The Portuguese government has backtracked on its controversial decision to increase employee social security (TSU) contributions, but has promised new tax increases in the 2013 Budget. Portuguese Prime Minister Pedro Passos Coelho finally withdrew the disputed measure, announced on September 7, after a political crisis that saw hundred of thousands of protesters in several cities on September 15. The measure also drew criticism from across the political spectrum, from the President to government members, as well as the business community which would have benefitted from the proposed hike.

The European Commission has already announced that the Portuguese government should quickly introduce new measures that will overwrite the TSU changes, "in order to avoid the discontinuation of European loans." According to Público —

Brussels insists that new measures should be endorsed by the troika of international lenders (European Commission, IMF and European Central Bank) ahead of the meeting of eurozone finance ministers on October 8, which will formalise the decision to release the sixth tranche of European loans destined to cover the state’s forthcoming financial needs.

The Lisbon daily adds —

For the country as well as the government, there is a before TSU and after TSU. For the Prime Minister, there is only one lesson to learn. And that lesson is that you cannot continue to govern by ignoring the country, by ruling without listening.

Business daily Jornal de Negócios goes even further in criticising the government, and accuses it of hiding the truth from the Portuguese people —

The credibility of the austerity policy is no longer about ideological differences, it is today a mathematical problem. It is not working. How can we trust in someone who estimated 11.6% growth in VAT revenues when, in the end, it fell 2.2%? (...) How can we rely on forecasts for 2013 after the failure of 2012? (...) Yesterday’s announcement of more taxes, was vague and ambiguous. (...) To sow uncertainty reveals not just amateurism, it reveals insecurity, lack of strategy, inability to lead a nation that is being undone by bills.

Jornal de Negócios signs off with a message and a question for the EU-ECB-IMF troika —

Gentlemen, the government has not cut state expenses as promised, but the Portuguese have done everything that you have asked. It failed. This failure is also yours. And only you can change policy because the government fears you and Portugal is counting on you. What will you do?