Merkel visits Lisbon to bolster austerity

Angela Merkel, Germany's chancellor, visits Portugal on Monday in a show of support for Lisbon's tough line

Story highlights

  • Merkel praised Lisbon on Sunday for the "courageous way" it had implemented deficit-reduction measures
  • Merkel arrives at a critical moment ahead of final approval of the country's toughest budget in recent history
  • Portugal's international lenders agreed in September to give Lisbon an extra year to meet agreed fiscal targets

Angela Merkel, Germany's chancellor, visits Portugal on Monday in a show of support for Lisbon's tough line on austerity as the centre-right government comes under increasing domestic pressure to renegotiate the terms of its €78bn bailout.

Ms Merkel praised Lisbon on Sunday for the "courageous way" it had implemented deficit-reduction measures, saying in an interview broadcast by Portuguese television that there was "at the moment no reason to renegotiate" the assistance programme.

The German chancellor and Pedro Passos Coelho, Portugal's prime minister, are united in seeking to depict Portugal's bailout as a success story in which EU rescue funds are being put to good use to turn round a debt-stricken economy.

But the public mood in Portugal has altered significantly over the past two months, from a broad consensus over the need for austerity to growing political and social resistance to additional spending cuts and tax increases.

Ms Merkel arrives at a critical moment ahead of final approval of the country's toughest budget in recent history and two days before a 24-hour general strike, the second this year in protest against increased austerity measures.

Several protests against her visit are planned and police have stepped up security to what the Portuguese media describe as exaggerated levels.

But the German leader is not expected to face the same level of violent demonstrations and insulting taunts from protesters as she did during a recent visit to Greece.

The centre-left Socialists, the main opposition party, have stepped up calls for the government to renegotiate the rescue package, seeking more time to meet fiscal targets and lower interest rates on bailout loans from the so-called "troika" of the EU, European Central Bank and the International Monetary Fund.

"We need more time to consolidate our public accounts and to pay our debts," said António José Seguro, the Socialist leader. "We need lower interest rates because we cannot continue with the excessive burden of servicing our debt."

Portugal's international lenders agreed in September to give Lisbon an extra year to meet previously agreed fiscal targets.

Mr Seguro's call for a further softening of terms has been echoed by a number of independent analysts -- several of them close to the two parties in the government coalition -- who believe excessive austerity is choking off any potential for the economic growth needed to lift Portugal out of a deep recession.

Many Portuguese are anxious that Ms Merkel, seen as the chief representative of the country's international creditors, is made aware of and shows respect for the deep sacrifices the country is making to comply with the bailout.

A short film made at the suggestion of some Lisbon political commentators aims to show that the "Portuguese work longer hours, pay more taxes and have fewer holidays" than Germans. But a bid to have it broadcast in Germany ahead of Ms Merkel's visit proved unsuccessful.

Mr Passos Coelho, who has faced a number of political setbacks since September, will welcome Ms Merkel's endorsement of his insistence that Portugal will not need more rescue funds or more time to meet the deficit-reductions targets it has agreed with international lenders.

In her interview with Portuguese television, Ms Merkel said she did not expect Lisbon would need a second bailout. "At the moment, the measures have been well implemented and we're hoping the programme will be a success," she said.

As well as Mr Passos Coelho, Mr Merkel is scheduled to meet Aníbal Cavaco Silva, Portugal's conservative president, and a delegation of Portuguese businesspeople.

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