Portugal's government announced a limited float of the escudo and other sweeping fiscal reforms to lead the country out of recent economic doldrums last night.
THe changes listed by Socialist prime minister Mario Soares include an end to industry-wide contracts, higher interest rates on savings, and a 25 per cent rise in gasoline prices, already the highest in Europe.
The Communist Party branded Soares' reforms anti-labor and a sellout to capitalist interests, by which it meant the International Monetary Fund.
Soares countered that the reforms are meant to save the revolution, saying socialism must wait until the economy is improved and democracy stabilized.
Portugal is now paying the price or two years of utopia, anarchy, subversion and ideological conflict, Soares said, referring to the period between the April 1974 revolution and the election of his own minority government last year.
In a speech broadcast Thursday night, Soares listed the following steps:
Industry-wide labor contracts will be suspended to help near-bankrupt industries recover. Workers temporarily laid off will retain seniority, and other benefits and receive assistance.
The escudo, already devalued 15 per cent in February, will be allowed to fluctuate approximately 1 per cent per month.
The basic bank rate is to be raised by 4 per cent to 15.5 per cent, to encourage savings and discourage currency speculation. The central bank rate was raised from 6.5 to 8 per cent in February but from now on credit will be limited to vital sectors of the economy.
The national budget is to be cut by 10 to 20 per cent.
Fuel prices will go up, with premium gasoline to sell fo $2.55 a gallon. The Portuguese Automobile Association says the price of gasoline has risen some 228 per cent over the past six years.
According to Source the government decided against and outright devaluation of the escudo, which would lead to increases in the price of raw materials. "Our exports must remain competitive," Soares said.