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Portugal budget goes to parliament vote

Published on 11/11/2011

The Portuguese parliament is to vote on Friday on the 2012 austerity budget planned to put the country's finances back in order despite widespread popular discontent at some of the measures.

The vote comes just as the Italian parliament votes on economic reforms demanded by the European Union in its fight against debt contagion, and as Greece makes progress on a new government to enact deep budget changes.

Portugal was bailed out in May to the tune of 78 billion euros ($107 billion) by the European Union and International Monetary Fund, and the government has pledged to raise taxes and cut spending, an unpopular mix which has hit growth hard.

The 2012 budget, described by Prime Minister Pedro Passos Coelho earlier in the week as “very tough,” will scrap two extra monthly payments per year for civil servants and pensioners with income above 1,000 euros per month.

The working day will be increased by 30 minutes in the private sector, while health and education budgets spending will be slashed, topping off a series of measures already adopted in efforts to reduce the deficit.

Prime Minister Passos Coelho concedes that the measures are even tougher than those required under the EU-IMF bailout terms but says they are necessary to ensure its targets are met in the face of difficult economic conditions.

The government estimates that the budget will see the economy shrink 2.8 percent in 2012 while the EU puts the downturn at 3.0 percent, for the worst performance in the bloc.

The prime minister’s centre-right government, elected in June amid widespread disillusionment with the Socialists, has a comfortable majority in parliament which should clear the budget’s first reading on Friday.

It will cast a final vote on the budget on November 30.

Portugal followed Greece and Ireland in needing a bailout and EU, IMF and European Central Bank officials are currently in Lisbon to review progress under the bailout deal and decide whether to clear the next 8-billion-euro loan installment.

Under the accord, Portugal 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.