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November 24, 2010    

Portuguese strikes bring country to a standstill, fears for Spain grow

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by Kay Murchie
Portuguese strikes bring country to a standstill, fears for Spain grow

Portugal came to a standstill today after its biggest strike in more than 20 years as workers protested against the Government’s austerity measures.

The Government has introduced massive spending cuts and tax hikes, which are currently being pushed through parliament. They are aimed at bringing the budget deficit down to 4.6% next year, from the current 7.3% of GDP.

Portuguese workers at ports and hospitals participate in today’s strike and Lisbon’s metro rail service was closed, while flights from Lisbon and Oporto airports were cancelled.

The transport sector ground to a halt with over 75% of train services and more than half of bus services cancelled.

The strike comes at a time when markets are nervous about the current situation in Portugal, with yields on 10-year bonds rising to dangerous levels – mimicking what happened in Greece and Ireland – just before they were forced to seek emergency aid.

Another weak euro zone economy, Spain, is facing contagion from the Irish debt crisis. 10-year Spanish bonds also surged earlier today.

On Monday, Jean-Claude Juncker, Luxembourg Prime Minister and Eurogroup Chairman, warned that Ireland’s debt crisis could spread to Portugal and Spain.

However, both countries brushed the fears aside and Portuguese Prime Minister, Jose Socrates, said it “has no need for any aid” and insisted that its difficulties are different to those in Ireland, while Spanish Foreign minister, Trinidad Jimenez, insisted the Irish deal will “stabilise” the euro zone.

However, while a bailout for Portugal would be much less than €80 billion that Ireland has sought, bailing out Spain would require a much larger sum, according to analysts.

The Spanish economy accounts for 12% of economic output among the 16-member bloc - equivalent to twice that of Ireland, Portugal and Greece combined.

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