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Portugal shows austerity zeal, postpones high speed rail

Portugal’s new centre-right government vowed Tuesday to exceed austerity targets agreed in its EU-IMF bailout, sacrificing the completion a high-speed rail link with Spain.

Suspending construction of the Lisbon-Madrid high-speed rail link that was due to be completed by 2013, formed part of a four-year government programme submitted to parliament for approval.

The government of Portuguese Prime Minister Pedro Passos Coelho vowed to “apply scrupulously the measures negotiated with the International Monetary Fund and the European Union,” but said it wants to be “more ambitious in the adjustment process for the Portuguese economy”.

This was to “guard against possible external and internal risks,” said a government document detailing the plan.

Under Portugal’s 78-billion-euro ($112 billion) bailout, Lisbon must implement tough measures to control public finances, introduce reforms and sell off state assets to improve the weak structure of the economy.

The country should squeeze its public deficit from 9.1 percent of gross domestic product last year to three percent in 2013.

There have been increasing concerns that a Greek default could spread a new wave of contagion throughout the eurozone, further damaging weaker economies like Portugal.

“Supplementary measures of a structural nature” will be adopted if need be to “ensure the respect and early attainment of targets to which the country is bound and to also restore international confidence in its economy,” vowed the government.

The government programme, due to be debated by lawmakers on Thursday and Friday, announced it would “suspend” construction of the high-speed rail project.

This could be reexamined at a later stage with a view of an eventual renegotiation of the contract, the document said.

The contract for the first section of the Madrid line was signed in May 2010 while the tender process for a second section was never completed.

The project was to cut travel time between the two capitals to under three hours and link Portugal to Europe’s high-speed rail network, at a cost of 3.3 billion euros to Lisbon.

In Madrid, Spain’s transportation minister, Jose Blanco, said if the suspension is approved, it would be “a bad decision” while adding that he also wanted clarification if it would be a temporary or permanent halt to the project.

The rail link was a flagship project of former Socialist prime minister Jose Socrates, but the centre-right has long called for it to be delayed to cut the country’s debt, which hit 93 percent of GDP last year.

The new government also pledged to reexamine the construction of a new airport for Lisbon, which was scheduled for completion by 2017.

It pledged to widen privatisation of state-held media to include the sale of one television channel, a radio station and the Lusa news agency.

The government also promised labour market reforms to eliminate fixed-term employment contracts while simplifying regulations for employers to terminate new hires.

It pledged to follow through on existing legislation and create an independent authority to monitor spending.