Alexandria Silva

Alexandria Silva, a marketing student aged 20, admitted that she didn't understand the technicalities of the financial storm heading for Portugal, or why the economy was in such a mess.

But she did have a pretty good idea of how she would cope with the crisis.

"I will get out as soon as I graduate next year, to Brazil," she said. "It has a growing economy and people like me can do well there." She was returning from her lectures, walking along Lisbon's most fashionable shopping street past posters for last Wednesday's mass general strike. Unions said that around three million stopped work to protest painful government spending cuts, the biggest action of its kind since the 1980s.

If they stay at home in this kind of economic environment, many young Portuguese have concluded, they will not succeed in life. The economy is stagnant - the nation has been called the Sick Man of Europe – the older generation have a stranglehold on good jobs, and the future looks bleak.

With unemployment at 11 per cent, opportunity is something to seek abroad, and their parents don't blame them.

Now, public spending is being slashed back in a way not seen for a generation, with a socialist government desperately trying to stop Portugal falling as the next domino in the euro crisis. José Sócrates, the prime minister, insisted last week that a bailout would not happen, much as Ireland's leaders did in the days before their own financial rescue.

He may just cut spending enough to stave off an Irish-style humiliation, but most analysts doubt it. With markets sensing weakness and threatening to force up the price of its borrowing, in the next few weeks Portugal may have no choice but take a bailout of around €50 billion from the EU and IMF, possibly twice as much. If it does, the economy could be buried even deeper in a hole it is too feeble to crawl out of, and its people will be even more demoralised than they are now.

The prospects for young people were bad even before their current economic woes. Their parents enjoy job security which makes them almost unsackable no matter how little work they do, especially in the bloated public sector.

Many public servants are paid for a 14 month year – with extra month's pay at Christmas and in summer. Senior public servants get cars and drivers, whether they want them or not.

The young, who entered the workforce when perks and safe jobs had come to an end, must struggle through on short-term contracts and bad pay. So many of the best-educated and brightest depart – and Portugal loses the energetic, skilled people it desperately needs. Ines Grasina, 18, a friend of Miss Silva, said she would also leave when she graduates, probably for London.

"I think a lot people are leaving Portugal to find jobs," said Ines Lamas, 25, a travel agent. "A friend of mine has just left to try to set up a restaurant in Mozambique. The debt problem here is getting worse. Things don't look good at all."

Portugal has always had large-scale emigration – around three million live abroad and ten million at home – but in the past it was the working class and villagers who left for a better life, not the skilled and well-educated.

Lack of competitiveness is at the heart of Portugal's economic problems, bemoaned by everybody from heads of industry to café owners. Unlike Greece, the nation's finances have been fairly well run. Unlike the Irish, the Portuguese are not in a mess because of the bursting of an unsustainable boom.

Their problem is that their economy has just limped along for the past decade as the rest of Europe prospered, stifled by overregulation and not helped by an inefficient public sector.

Most Portuguese are fiercely loyal both to the European Union, which spent lavishly on their infrastructure, and the euro, which they credit with bringing financial stability since they joined in 1999. They took out cheap loans to pay for cars and nice homes which previous generations couldn't have dreamt of owning.

But the euro has been blamed for making their crucial textile and footwear export industries uncompetitive, with much of the business disappearing to Asia. And since the crisis first struck in 2007 tourism, another mainstay, has taken a battering because of the strong euro. The British have preferred to spend their holidays in the sun in cheaper countries and the Irish, big spenders a few years ago, have vanished from the Algarve. They are even more bust than the Portuguese.

"Business is very bad," said Antonio Sousa, proprietor of Lisbon's oldest café, the Martinho Da Arcada, founded in 1782 and famous for its custard tarts sprinkled with cinnamon. Between pouring glasses of port for American tourists and serving milky coffee to off-duty police officers who had just held a demonstration against spending cuts, he complained about the Portuguese work ethic and a state that was too big.

"The Portuguese are entrepreneurs all over the world, but not here at home," he said. "Millions rely on the state. It is no wonder young people want to go to Brazil – that's the future if you have energy. Here people just expect to be mollycoddled."

That may be true for those in a safe public sector job, but for those on the bottom life is now much harder. "I lost my job as an accounts clerk eight years ago and it has been impossible to find a new one," said Anna Duarte, a middle-aged woman who had just eaten dinner at one of Lisbon's many soup kitchens, now relied on by an estimated 200,000. She still looked presentable, unlike the tramps and alcoholics stumbling past her.

"I had to summon up the courage to come here first a year ago, when the dining hall was half empty. Now it is nearly full every night and many of the people are like me. It's bad now and I'm really worried about what the future will be like." A bailout will do little to help people like her. With market pressure building, on Friday the European Commission had to deny that it was encouraging Portugal to take billions to calm markets and stop the contagion.

If no cure is found, the next place for contagion will be Portugal's neighbour Spain, with economic problems similar to Portugal's and in some ways worse, and a much bigger economy - the fifth-biggest in the EU. If the contagion spreads across Portugal's border it could be terminal to the single currency.

(source:telegraph.co.uk)