Portugal delays high speed rail link as part of austerity

Portugal’s new centre-right government sacrificed on Tuesday the completion a high-speed rail link with Spain as part of efforts to beat austerity targets agreed in its EU-IMF bailout.

The suspension of the construction of the Lisbon-Madrid high speed rail link that was due to be completed by 2013 was included in the government’s four-year programme which it submitted to parliament.

The programme of Portuguese Prime Minister Pedro Passos Coelho vowed to “apply scrupulously the measures negotiated with the International Monetary Fund and the European Union.”

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

However, the government signalled it wants to be “more ambitious in the adjustment process for the Portuguese economy” in order to “prevent against possible external and internal risks.”

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

The government programme, which is to be debated by lawmakers on Thursday and Friday, said the high-speed rail project could be reexamined with a view of an eventual renegotiation of the contract.

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

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