General strike in Portugal over austerity measures

Portugal's biggest unions went on their first joint general strike since 1988 today, hoping to weaken the Socialist government's resolve on implementing austerity measures meant to tackle a debt crisis.

The country's two biggest unions stopped trains and buses, grounded planes and halted services from healthcare to banking in protest against wage cuts and rising unemployment in western Europe's poorest country.

Prime Minister Jose Socrates, whose government is struggling to quash speculation that Portugal will be the next in Europe to need a bailout after Ireland and Greece, has pledged to stay the course on wage cuts and tax hikes to cut the budget deficit.

As the strike kicked off, Portugal's largest exporter, Volkswagen's (VOWG.DE) Autoeuropa plant, halted production altogether. The plant produces up to 500 cars on an average day.

"The production line is completely shut, so we expect that no cars will be produced today," said Autoeuropa union coordinator Calros Chora, adding that only a small part of the plant dealing with repairs would be open.

"There is a picket line outside, but they are letting people in and out," he said.

Lisbon has been plastered with banners for weeks urging workers to join the strike.

The CGTP union said all ports were now shut, and check-in counters at Lisbon's main airport was empty. National airline TAP has cancelled most flights. However no mass protests were expected on Wednesday.

Roads in and around the capital Lisbon were choked with heavy traffic as many people chose to commute by car. Cafes and shops were open and vans delivered goods as usual.

The unions hope to tap into the growing dissatisfaction with the minority Socialist government's austerity measures, which also include across the board spending cuts in public services.

"It's the workers who are paying for the crisis, not the bankers nor the shareholders of big companies," said Leandro Martins, a 65-year old pensioner.

"This is a strike against rightist policies, to demand new policies serving the Portuguese people."

Portugal has suffered from years of low growth - unlike other weak euro economies such as Ireland and Spain that went from boom to bust - and waning competitiveness which economists say undermines its ability to ride out the debt crisis.

"Maybe the strike will not provoke radical changes in the austerity course the government has chosen, but it does represent an additional element of uncertainty in the already unstable setting in the country," said Elisio Estanque, a sociology researcher at the University of Coimbra.

The country's risk premium - or spreads on its bonds over safer German Bunds - hit a euro lifetime high on Nov. 11 and was close to that level on Wednesday, at 460 basis points.

Even though the economy is growing this year, economists fear it will slide back into recession in 2011 as higher taxes and civil servant wage cuts of five percent bite into consumption.

Unemployment, already at its highest since the 1980s at 10.9 percent, could rise further.