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EU, IMF officials in Portugal to review bailout deal

Published on 07/11/2011

Officials from the EU, International Monetary Fund and European Central Bank arrived in Portugal Monday to review progress in its debt bailout after calls for the terms of the rescue to be relaxed.

The officials will spend two weeks assessing “the work done up to now and the forward planning for the following quarters,” Lisbon said in a statement announcing the trip.

Portugal wants to get the all clear on the next 8-billion-euro ($11 billion) tranche of a 78-billion-euro bailout deal agreed to in May, avoiding the delays which have bedevilled the Greek programme.

At the same time, Prime Minister Pedro Passos Coelho has previously called on the three creditor bodies to agree to adjustments in the package which requires stiff austerity measures in order to balance the public finances.

The government concedes that the plan is necessary on that basis but the associated spending cuts have pushed the economy into recession, making achieving its recovery targets even more difficult.

The country needs to reduce its public deficit from 9.8 percent of Gross Domestic Product in 2010 to 5.9 percent by the end of 2011 but it stood at 8.3 percent earlier this year, putting that objective in doubt.

Last month, EU Economic Commissioner Olli Rehn said Portugal may not meet the deficit target demanded by creditors for 2011 but remained optimistic about next year’s budget programme.

Passos Coelho’s centre-right government has already tabled a tough 2012 austerity budget that includes the temporary suspension of 13th and 14th month salary payments for civil servants and pensioners who earn more than 1,000 euros a month.

The cuts were unpopular with both the opposition Socialists and the general public. Portugal’s two main unions have called for a general strike over the cuts on November 24.

Speaking last week, Portuguese President Anibal Cavaco Silva called for understanding from Lisbon’s creditors as the country strives to meet its obligations.

“The financing of the Portuguese economy is one of the most serious problems that we face and Portugal hopes for a greater understanding on the part of international institutions,” he said.