* Two largest unions to lead anti-austerity strike on
* Strike adds to concerns over yields as Fed's QE to
* Bond yields highest since December, near unsustainable 7
By Andrei Khalip
LISBON, June 26 Portugal's fourth general strike
in two years on Thursday will highlight the dilemma faced by the
government, which imposed dramatic austerity measures to return
to financial markets after a 2011 bailout only to see its bond
yields soar this month.
While unlikely to be economically-crippling or violent, the
planned strike and protests should send a loud reminder to the
administration that the population blames an economic slump and
record unemployment on its spending cuts and tax hikes.
Its argument that the sacrifices have made it possible for
the country to resume financing via bonds and start paving the
way out of the European Union and International Monetary Fund's
bailout programme by mid-2014 as planned, is wearing thin.
Bond yields have spiked across the periphery of Europe's
single currency zone since the U.S. Federal Reserve said it
would wind down injections of cheap money that investors used to
buy risky bonds. Portugal's yields have risen more than most.
"If we think about it, our future is a dark,
living-under-the-bridge kind of future... But we don't stop
believing, fighting and demanding," said Catarina Vieira, 24,
who plans to take part in rallies and picket lines on Thursday.
Analysts expect the one-day stoppage to close many public
services, halt trains and the Lisbon metro and halve bus
services in the capital, but involve little participation by the
private sector or major utilities.
State-owned airline TAP has warned of possible disruption
but not cancelled any flights.
Striking means losing a day's pay and that is something many
workers' families now simply cannot afford in the third year of
Portugal's worst recession since the 1970s, and the unions'
demands for urgent moves to boost growth may fall on deaf ears.
"We'll call for a new government, because this one is the
death blow to the youth and to the country," Vieira, who has
been unemployed for over a year, one of the record 42 percent of
Portuguese youth who are now jobless.
It will be the second time the two largest labour unions,
with over 1 million members between then, have held a joint
general strike against the government, which came to power right
after Lisbon resorted to an international bailout in mid-2011.
Despite record low approval ratings, the centre-right
coalition has a comfortable majority in parliament and is
practically immune to the opposition's calls to unseat it.
Portugal's 10-year bond yield has soared from three-year
lows of around 5 percent, reached in May when the country sold
its first syndicated benchmark bond since the bailout, to almost
7 percent now - its highest since December. Still, the yield is
well below last year's record of over 17 percent.
"Thank God Portugal got its 10-year bond sold, it wouldn't
stand a chance in hell to do that now," said Nicholas Spiro,
Managing Director at Spiro Sovereign Strategy in London.
On Tuesday, Finance Minister Vitor Gaspar downplayed the
rise in the yield, telling parliament he expected to resume
regular bond auctions this year.
Also undermining Portugal's prospects of regaining full
access to market financing are investor doubts whether the
European Central Bank will ever use its yet untested bond-buying
programme. The ECB's pledge last July to do whatever it takes to
preserve the euro made yields plummet and stay low until May.
The strike has added to investor concerns, especially after
violent protests in Turkey and Brazil, although analysts do not
expect such spontaneous unrest in Portugal.
"Austerity fatigue and the ongoing recession leave Portugal
vulnerable. Riots in other countries have left the market a bit
overly concerned," said David Schnautz, interest rate strategy
director at Commerzbank in New York. "But then it could be a
positive for Portugal if it ends without violence."
There was still a good chance yields would fall to make bond
auctions or swaps possible by September, he said.
Viriato Soromenho Marques, a political scientist with the
University of Lisbon, said the strike would not unseat the
government but any more austerity measures beyond those planned
until 2015 could trigger "a stronger reaction in the streets".
The government is sticking with its plan to 2015, but has
hinted it will rather seek an easing of bailout targets than
impose more austerity beyond that.
Celia Rocha, 32 and an accountant in a small printing
company, said she will work on Thursday.
"My heart goes out to those who strike to defend their jobs,
but these stoppages affect me and my job. If my company shuts
down, what am I supposed to do?" she said as she waited in the
scorching sun outside a ferry terminal in Lisbon, shut by a
partial strike preceding Thursday's labour action.
"We are in a very sad situation, there appears to be no way
out, strikes or no strikes."