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Portuguese Just Shrug and Go On in the Face of Cuts and Job Losses

The factory at TemaHome, a furniture company, where sales have dropped to $10 million from $18.5 million in five years.Credit...Joao Pina for The New York Times

LISBON — Behind the cheery yellow edifice that is this country’s Finance Ministry, where the news is not so cheery these days, Joaquim Marçalo’s waterfront grill is open for business, any business at all, seven days a week.

There was a time not so long ago when Mr. Marçalo could afford to close his restaurant, the Coffer, one day each week, he said; when he could afford a staff of 12, not 8; and when the daily take was around $2,000, not $1,000 to $1,200 or so. There was a time, too, when he paid a levy of just 6 percent on electricity and gas, not 23 percent; when public services were not being slashed; and when austerity was not the national watchword. With a shrug, though, Mr. Marçalo said, “It could be worse.”

That coolheaded assessment, on the lips of Portuguese everywhere, seems an apt summary of this country’s approach to the euro crisis, which last spring drove tiny Portugal into a $96 billion bailout and a painful austerity program.

The most optimistic projections point to a 3 percent contraction of the economy this year, after a 1.5 percent decline in 2011. Officially, unemployment is at 14.9 percent, its highest point in more than a decade, and more than 30 percent of the country’s young people are out of work. But some analysts suggest that the government is underestimating the true jobless rate, especially for youths, which they say may run as high as 40 or 45 percent.

Hospitals are closing. State benefits, public wages and pensions are being cut. New taxes have been added, and old taxes increased. The government has sold its stake in the national electric company to a state-run Chinese corporation.

In Greece, austerity along these lines unleashed chaos and rage in the streets of Athens and brought about the rise of political extremism. The crisis in France helped drive the conservative Nicolas Sarkozy from the presidency in favor of a socialist, François Hollande, who is calling for a renewed emphasis on growth.

But for all the talk of fascism and firebombs, most people in the austerity zone — which includes Ireland, Greece and Spain — seem to accept their lot. Even the Irish, who have occasionally rebelled against their own government, approved the deficit-cutting European Union fiscal treaty last week by a healthy margin.

Perhaps nowhere, however, are people quite so acquiescent as in Portugal. Month after month, the government has obligingly put in place the budget cuts, tax increases and loosened labor laws demanded by its international creditors — the so-called troika of the European Commission, the European Central Bank and the International Monetary Fund — with little protest from the Portuguese.

The troika recently cited Portugal’s success in cutting its budget deficit last year to 4.2 percent of gross domestic product, from a high of 10.2 percent in 2009. And with exports rising to a record level in 2011, Portugal’s trade balance has also improved significantly.

While some opposition leaders and trade unions have called to slow the pace of budget cuts, few suggest that the changes are not ultimately necessary. Nor do they contest the urgency of efforts to improve the economy’s competitiveness.

“The Portuguese are mild people,” Mr. Marçalo said. “We don’t take to the streets so much.”

That forbearance seems likely to be tested in the coming years. Although the country’s budget deficit is shrinking, public debt as a percentage of gross domestic product continues to rise as the economy contracts. With bond yields in the double digits, there is even talk of a second bailout.

There is little immediate prospect of growth, economists say, particularly with educational levels far lower here than anywhere in the European Union or in much of the developed world. In 2009, only 30 percent of Portuguese adults had completed high school or its equivalent, according to figures from the Organization for Economic Cooperation and Development.

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Above, Osvaldo Simoes, a quality-control worker TemaHome. “We’re all guilty,” one employee said. “Everyone closed their eyes.”Credit...Joao Pina for The New York Times

“The poor Portuguese, they have just neglected to invest in high-quality human capital,” said Daniel Gros, the director of the Center for European Policy Studies in Brussels. The only path to growth will be through further wage cuts, Mr. Gros said, “because their economy, structurally, given the low human capital, is in products and industries in which low-wage competition is just overwhelming.”

That competition has changed the outlook at TemaHome, which has been manufacturing furniture since 1981. Five years ago, annual sales hit $18.5 million, with 70 percent of that coming from exports to the rest of Europe. Last year, with demand plummeting, sales fell to just $10 million.

In 2007, 160 people worked on TemaHome’s factory floor in Tomar, about 75 miles north of Lisbon; today, there are just 105, and the company is struggling to compete with factories in Eastern Europe and China, said Luís Vicente, the production director. TemaHome’s future lies in producing high-quality, customized furniture, he said, and it has hired a handful of designers and salespeople even as it has shed factory workers. Revenues in the first quarter were up 20 percent this year.

“This crisis is making us a little stronger than we were otherwise,” said Miguel Calado, one of TemaHome’s primary investors. “And you can say the same thing about the country.”

The problem, Mr. Calado said, is that the health of the Portuguese economy — which, like TemaHome, relies heavily on exports — is linked to demand in Europe, which is tipping into recession.

José Santos oversees painting at TemaHome, where he has worked for three decades. Of the $1,500 he takes home each month in salary, Mr. Santos, 52, used to set aside $125 to $185 as savings. But with taxes rising and his son’s $1,250 academic scholarship revoked as part of the austerity cuts, he said, “I spend what I earn.”

He is angry at the cuts, but feels some personal responsibility for Portugal’s plight just the same.

“We’re all guilty,” he said. “Everyone knew what was happening before. Everyone closed their eyes.”

He has no plans to protest, and he does not expect that many others will, either. “It’s a question of culture,” he said.

It is a common refrain here, though by no means universal. There have been walkouts by both public employees and company workers, including two general strikes. There have also been demonstrations in downtown Lisbon, but no violence.

“We obviously need to clean up our national accounts,” said Rogério Silva, the general secretary of Fiequimetal, a federation of manufacturing unions. “We’re just against these measures because they’re not making the economy grow.” He says he is upset by a general “attitude of inaction,” calling it “typically Portuguese.”

Memories are still sharp here of the poverty of the mid-20th century, when just half of homes had running water and only 30 percent had electricity. In the 1980s, with the state nearly bankrupt and inflation running at over 30 percent, more than one million workers saw their salaries withheld for months on end. There were no major protests, though, said António Barreto, a sociologist and former government minister. Most workers declined buyouts and continued to work without pay.

“This generation doesn’t want to lose what they have,” Mr. Barreto said. “There is complacency, yes. But there is wisdom, too.”

Joaquim César, a supervisor at the TemaHome factory, said the budget cuts were deeper than necessary, but he accepted austerity as a necessary evil. “Since we were poor before the crisis, we don’t feel so different now,” said Mr. César, 54. “To be angry, it’s not worth it,” he said. “Bad humor won’t get us anywhere.”

A version of this article appears in print on  , Section A, Page 10 of the New York edition with the headline: Portuguese Just Shrug And Go On in the Face Of Cuts and Job Losses. Order Reprints | Today’s Paper | Subscribe

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