The Portuguese ended the year of 2012 with more austerity measures imposed by the ruling conservative coalition led by Prime Minister Pedro Passos Coelho, who made privatization a central tenet of his agenda.
Portugal had promised international lenders to keep the 2012 deficit at 4.5 percent of its GDP, but in September the Coelho government managed to and raise the 2012 deficit target to 5 percent after renegotiating the terms with the troika that comprises the European Central Bank, the International Monetary Fund and the European Commission.
The prime minister recently said he still expected to meet that goal, and to that end it was necessary to undertake several privatization projects.
During 2012, privatization has provided over 6.4 billion euros to the state coffers, surpassing the 5-billion euros demanded by the EU aid program.
Meanwhile, 2012 was also characterized by both economic and social crisis. Unemployment remained a major problem for the country during the year as the number of unemployed has increased by 16 percent, a record high.
The three leftist parties -- the Socialist Party, the Communist Party and the Portuguese Left Bloc -- voted against the budget for 2013, which was marked by austerity. Among the adopted measures was the creation of a special tax of 3.5 percent which will be applied to all Portuguese workers from Jan. 1.
In addition, Finance Minister Victor Gaspar decided to lower the threshold of the Singular Yield Tax, which in practice means the Portuguese need to pay more income tax.
In the meantime, from January 2013, retirees who earns more than 1,300 euros per month will suffer progressive cuts starting from 3 percent. Portuguese President Anibal Cavaco Silva took the issue to the Budget Constitutional Court.
A group of Portuguese deputies went to the Constitutional Court in June to challenge the government's decision to slash Christmas and summer holiday bonuses for public officials and the so-called "mileuristas" (those living on 1,000 euros per month).
Constitutional Court judges understood that the measure violated the principle of equality in the distribution of labor, as the measure was not applied at the same time in the private sector.
However, in order not to jeopardize the implementation of the 2013 budget, the judges concluded that the measure would be put into force in 2012, but could not be continued in 2013.
Under this circumstances, the Portuguese government sought alternatives to austerity measures. In September, Coelho announced his intention to reduce the single social tax -- a tax paid by companies to their employees for social security. Workers would have to pay more for social security.
The move was triggered the largest industrial action in the country in more than 30 years as more than 1 million Portuguese took to the streets of major cities, including capital Lisbon on Sept. 15.
The economic and political outlook for 2013 in Portugal does not appear brighter than the previous year. Economic forecasts are still negative with a contraction of around 1.8 percent and an unemployment rate of 17 percent.
