Pain of EU crisis felt in Portugal

LISBON, Portugal - Serving a frugal lunch in their kitchen not much bigger than a bathroom, Pedro and Elena Baptista spoon stewed chicken feet onto their boiled potatoes and leave the slightly meatier wings for their 12-year-old daughter, Vania, and 7-year-old son, Joao.

The Baptista family counts itself among the casualties of an unrelenting financial crisis that is squeezing the life out of some European Union economies, including Portugal. Pedro Baptista, a stocky 37-year-old, has found work as a part-time window cleaner but his wife Elena, 35, has been on welfare for almost a year after losing her job in a school canteen. Scraping by on a monthly household income of 650 euros ($840) and constantly going cap-in-hand to charities and family members has sapped their confidence.

But Pedro is determined to stay positive. "Ups and downs are part of life. Things will improve," he says. "We just have to hold on."

Exactly how long is hard to say, however, as Portugal's prime minister warns his nation to harden itself for more austerity.

It seems that every time Europe's leaders appear to have contained the continent's 3-year-old crisis over too much government debt, it erupts again - witness the recent woes in Cyprus. Across Europe, the long-held belief that the state will always provide for its citizens' well-being is vanishing.

In return for rescue loans, governments across the region are slashing spending and raising taxes. However, the austerity has a knock-on effect of choking the growth needed to pull countries out of their nosedive. Despite the acute hardship, Prime Minister Pedro Passos Coelho said Sunday that his government must cut even deeper. That's because the Constitutional Court last week struck down some austerity measures aimed at government workers and pensioners, denying the government more than 1.3 billion euros in anticipated savings.

Meanwhile, the debt crisis risks jumping from Cyprus to Portugal. The creditors who lent Portugal 78 billion euros in a bailout two years ago are demanding that the government prune spending by another 4 billion euros in 2014 and 2015. If Portugal doesn't comply, it could be denied the next installment of its bailout.

Portugal's ordeal has begun to send shivers across Europe, even as the pain becomes hard to bear at home. Pensioners, schools and government workers are in the crosshairs of the latest planned cuts. The austerity is destroying legions of small businesses. And charities say they are already struggling to cope with a deluge of calls for help.

Checking over her bank statement showing her monthly pension payment, Maria Luisa Cabral stared silently at the slip of paper. When she finally spoke, the 66-year-old former librarian's voice shook and tears welled.

"That's about 10 percent less each month," she said. "I just feel really angry."

Portugal's elderly have been hit hard by austerity. Taxes and cuts in previous years had already cut Cabral's income by 20 percent. This year, the government will take another bite out of pensions over 1,350 euros a month.

Public outrage greeted this year's tax hikes, which even the finance minister conceded were "enormous." As well as hurting pensioners, the hikes are costing many workers the equivalent of more than a month's pay.

Every month for 40 years, Cabral handed over part of her earnings for her state employee pension and calculated what she would have to live on after retiring.

"You deduct money all your working life on the assumption you'll be entitled to a pension at the end of it," Cabral said.

She reckons she'll now have to give up her life's little luxuries - buying a book, for example, or going to a cinema or a concert.

Governments across Europe are finding it harder to meet their expanding pension payments. The portion of retired people across Europe is quickly expanding and stretching welfare budgets. For Portugal, the outlay on state pensions has risen to 14.5 percent of gross domestic product from 9 percent since 2000, according to the government. The bill is forecast to keep growing through 2020.