Unemployed, Ana can no longer pay her mortgage and fears losing her home. With no chance of getting a bailout like the state, many Portuguese are turning to consumer advocacy groups like Deco — the Portuguese Association for Consumer Protection — to try to keep from losing everything.
“Banks have more respect for Deco than for clients in difficulty,” explained Ana, who stopped paying her €289 ($404) monthly mortgage payments in September, after losing her job due to depression.
Living in a Lisbon suburb, this 36-year-old has had to stretch her metalworker husband’s salary of €600 a month to make ends meet.
“For food, I only spend €80 as we receive charity donations,” she said, her eyes hiding behind small round spectacles.
Sitting at a Deco office, she explained that she is €2 300 behind in her payments. It’s decided that the watchdog will negotiate a grace period during which Ana will have to only pay interest on her debt.
“My greatest fear is losing my apartment, but I have no other choice,” she said. “Either I repay the bank, or pay my water and electricity bills.”
Portuguese have faced mounting financial difficulties as the government imposed austerity measures over the past year to try to keep on top of the country’s debts.
The country’s economy shrank by 0.7% last year and unemployment rose 12.4%.
Spending more than they had
However, the government was forced last month to request a €78-billion bailout from the European Union and International Monetary Fund to avoid a default.
It will now have to hike taxes further and make deeper spending cuts that are expected to cause a 2.0% contraction this year.
Antonia and Rosalia, a couple in their 50s, owe between €50 000 and €60 000 spread across half a dozen loans. Having defaulted on half of them, Antonio, a waiter, has had 30% of his €900 salary seized as forced repayment.
“We were tricked by bank advertising and when we realised the interest rates involved, it was already too late,” he said.
When debts are very high, Deco recommends families go to court and declare bankruptcy, which is becoming more and more frequent.
In 2010, Portuguese families sent Deco 17 000 requests for help, twice the level of 2008. In the first three months of this year, the number of case files is up by 22% from the same period last year.
“On average we treat couples aged between 35 and 45 years old, with a child at home, who have taken out more than five loans and face a fall in revenue, usually provoked by job loss,” said Natalia Nunes, a Deco manager.
“Lately, we have also received civil servants whose salaries have dropped due to austerity measures.”
In addition to the worsening economic situation explaining this explosion in cases, Nunes also points to families, “who, just like the state, for too long spent more than they had, encouraged by easy credit offered by banks”.
In March, according to the Bank of Portugal, 14.2% of the 4.6-million families with bank loans had defaulted. Average household debt levels in 2009 stretched to 130% of disposable income, against 96% in the eurozone overall.
The situation doesn’t look promising with the new austerity measures as part of Portugal’s bailout.
“With these measures and price increases,” Nunes warned, “problems will only get worse and the number of over-indebted families will increase.”