Main points of Portugal debt rescue programme
Portugal's outgoing government on Thursday unveiled austerity measures aimed at slashing its massive public deficit in exchange for a 78-billion-euro bailout ($116 billion) from the EU and the IMF.
The programme, which includes reforms and cutbacks, forsees a two-year recession before the economy returns to growth in 2013.
Portugal’s public deficit of 9.1 percent last year must be cut to the eurozone ceiling of 3.0 percent of output by the end of 2013.
Here are the main points of the programme:
Reduction of expenses:
– Freezing of wages of state employees and pensions until 2013
– Pensions exceeding 1,500 euros ($2,230) per month will be cut, which should save the government some 445 million euros
– Public administration will be streamlined (one billion euros), as well as health care (925 million euros) and education (370 million euros)
– Central government funding to localities will be slashed (635 million euros)
– A 15-percent cut in funding for publicly-owned companies (515 million euros)
– Unemployment benefits will be reduced as well as their duration (150 million euros)
– Tax deductions for health, education and housing expenses will be limited (325 million)
– Taxes on social benefits (300 million)
– Consumption tax hikes: tobacco, cars, electricity (400 million)
– VAT sales tax hike on some products (410 million in 2012)
– Judicial reforms including restructuring its network of courts
– Labour reform including lowering of redundancy pay
– Pushing for competitivity in the energy and telecommunications sectors
– “Rapid” privatisation of state airliner TAP, the Airport Authority of Portugal (ANA), postal service CTT, electricity group EDP, oil firm Galp Energia and Electricity Transmission Sector REN.
That should earn the governemnt 5.5 billion euros.
– Up to 12 billion euros in cash injections for Portugal’s banking sector. Lenders need to bring their Tier 1 capital — a core measure of a bank’s financial strength — to 9 percent at year-end and at 10 percent in late 2012 or face mandatory recapitalisation.