Lisbon granted extra year to cut deficit: minister

Heavily indebted Portugal has been granted an extra year to cut its public deficit, and will now have until 2015 to bring it below 3.0 percent of gross domestic product (GDP), Finance Minister Vitor Gaspar said on Friday.

“The new deficit limits are 5.5 percent of GDP in 2013, 4.0 percent in 2014, and 2.5 percent in 2015,” Gaspar told a press conference as he presented a quarterly review of reforms agreed to in exchange for aid from the European Union and the International Monetary Fund.

The targets had already been eased in September to 4.5 percent for this year, 2.5 percent in 2014 and 2.0 percent in 2015.

Eurozone countries are obliged to run public deficits of no more than 3.0 percent of output, and are supposed to work towards a balanced budget, and even a surplus in times of economic growth.

Last year, Portugal’s public deficit came to 4.9 percent of GDP, Gaspar said, taking account of revenues raised through the sale of stakes in Portuguese airports.

But he said some EU authorities might estimate that the deficit stood at 6.6 percent last year, without including the airport sales.

Portugal’s public creditors have given a green light to an eighth payment of emergency aid to Portugal, which negotiated a rescue package worth 78 billion euros ($102 billion) in May 2011.

Gaspar said Portugal needed the extra time to cut its deficit because of a weak economic climate that would result in the economy contracting by 2.3 percent this year, much more than a previous forecast decline of 1.0 percent.

“With the worsening recession, unemployment will continue to rise to an average of 18.2 percent this year” and to 18.5 percent in 2014, the finance minister warned.