LISBON — Nuno Pinto is 40, out of work and contemplating a step he thinks is the only way out of his family’s financial plight: personal bankruptcy.
Mr. Pinto, like many Portuguese, is financially strapped. He has no income, and gets by with the help of his elderly parents, but repayments on loans he took out before Portugal was engulfed by a financial crisis keep coming due.
Personal bankruptcies last year for the first time outnumbered company bankruptcies, accounting for 55 percent of all insolvencies in Portugal - another in a gloomy catalog of record-breaking statistics.
Portugal’s vulnerable, debt-riddled economy was crushed last year by Europe’s sovereign debt crisis. Portugal had to follow Greece and Ireland and take a $103 billion bailout to dodge national bankruptcy.
Lenders demanded debt-reducing austerity measures that have helped throw the country into a steep decline. Portugal is in its second straight year of worsening recession, and unemployment has climbed to a record 14.8 percent. Its continuing troubles could yet provide the spark for another European financial emergency.
“I’m up to my neck in debt,” Mr. Pinto said during a recent visit for legal advice at the Portuguese Consumer Defense Association in Lisbon.
He is close to defaulting on his mortgage and, along with his partner and 9-year-old daughter, faces imminent eviction.
“I’m here to see if I can get what’s my last chance - personal bankruptcy,” said Mr. Pinto, a burly man with gray hair and beard.
Gaining insolvency through the courts would allow him to renegotiate a special repayment plan with his creditors, warding off his most pressing problems.
Never so much in the red
Stories like Mr. Pinto’s are not hard to find these days in Portugal, a country of 10.6 million people enduring its worst hardship in recent memory.
The Portuguese are paying a heavy price for their country’s failure to move with the times during the past decade. Portugal’s calcified economy has produced almost no meaningful expansion since the turn of the century.
Mr. Pinto is one of at least 670,000 Portuguese who last year defaulted on their loans, a 5 percent jump from the previous year. Defaults on consumer credit amounted to $2 billion in January, a 14 percent increase since last May’s bailout. It is the highest level of unpaid private debt since the Bank of Portugal started keeping detailed records 15 years ago.
Total debt that was taken on by the state, companies, and individuals stood at 418 percent of annual gross domestic product (GDP) last year. The country has never been so deep in the hole.
Such perilous levels of debt have encumbered banks with piles of bad loans and raised the specter of Portugal needing to ask for more international financial aid that could prompt another bout of eurozone volatility, even though Portugal accounts for less than 2 percent of the GDP of the 17 European Union nations that use the euro as a common currency.
The Consumer Defense Association, a privately funded body, says that between 2010 and 2011 the number of requests for help it received jumped 60 percent to at least 23,000 families.
The problem is not just unemployment. Austerity measures have included public-sector pay cuts. The government has pruned welfare benefits and increased sales taxes, including a hike in the tax on electricity to 23 percent from 6 percent.
Little money left for food
Old certainties and expectations, such as inflation-linked pay increases and automatic promotions, are gone. All those austerity measures have combined to knock housekeeping budgets out of kilter to a point where many families’ disposable income - the amount left after taxes and bills - has shrunk so much there is little left for basics like food and clothes.
Natalia Nunes, one of the consumer association’s lawyers, said the middle class is hurting the most. The typical family reaching out for help has parents aged 35 to 45 with one child, together earning more than $2,000 a month.
“I recall a family with a child that came in here the other day and they told me that they start out the month with four or five [dollars],” she said. “We hear these kinds of stories every day.”
Caritas Portuguesa, a Catholic charity, reported last month that requests for help, including food aid, almost doubled last year to more than 95,000. In January and February this year, requests were up 46.5 percent over last year. The needy now include architects and lawyers.
Default, foreclosure and repossession are spreading at an alarming rate.
The tax authorities sold almost 28,500 properties last year to recoup tax debts, up from just over 27,000 in 2010. So far this year the seizures are occurring at an even faster rate, with almost 6,000 in the first five weeks.
Luis Sequeira Fernandes, an attorney who runs one of Portugal’s biggest law firms that collect debts for court-ordered judgments, said he is increasingly finding that debtors have no assets left to confiscate.
“I used to claw back around 60 percent [of money owed]. Now it’s about 30-40 percent,” he said.
“People are getting desperate and much, much more aggressive than before.”
David Justino, a stocky 32-year-old locksmith, has worked with debt-collection bailiffs for the past eight years. He said he occasionally pulls on a bulletproof vest for what he fears may be hazardous jobs, but people rarely go beyond threats when he forces entry to their homes.
His work can, nevertheless, be unpleasant.
“If I was just evicting adults it wouldn’t be a problem for me,” he said. “What bothers me is when there are small children or handicapped people. It’s not nice.”
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