LISBON (Reuters) - Portugal’s construction sector, the country’s largest employer, faces rampant unemployment and bankruptcies that threaten the repayment of 38 billion euros in debt to the banking sector, the head of the debt-laden country’s Construction and Real Estate Confederation said on Thursday.
Manuel Reis Campos warned that the government was not reacting in the face of a “looming catastrophe”.
“The (construction) sector owes 38 billion euros to the banks, bad loans have gone up sharply, much more than expected, along with bankruptcies. We expect 13,000 companies to go bust this year and the sector to lose 140,000 jobs,” Reis told foreign correspondents at a briefing.
Unlike neighboring Spain, Portugal had no property bubble before the economic crisis started in 2008.
But the construction and real estate sector has been hit by a sharp drop in economic activity and internal consumption caused by the sweeping austerity measures required in exchange for the 78 billion euro bailout provided by the European Union and the International Monetary Fund.
“The sector has no work, the banks don’t finance us and the state does not pay. It is a disaster,” Reis said.
He predicted 20 percent unemployment in Portugal before long, given the sector’s woes, and complained the government did not pay its bills on time.
The government expects unemployment to rise to 15.5 percent this year from last year’s 14 percent and to 16 percent in 2013.
“We are the sector to whom the state owes the most, after pharmaceutical companies. It owes us 1.4 billion euros,” Reis said. He added that the public sector takes, on average, 8 months to pay its bills.
Construction and real estate employed 670,000 workers in Portugal in 2011, compared with 830,000 in 2008.
“Last year the sector lost 84,000 workers. We lost 38,000 workers in the first four months, more than we feared. We are losing 27 companies per day,” Reis said.
The sector’s output represents around 18 percent of national gross domestic product.
Reporting by Daniel Alvarenga, editing by Tim Pearce