Portugal first-half budget deficit down sharply

Portugal’s first half budget deficit fell sharply to 8.3 percent of gross domestic product from 10.4 percent in the same period last year, official data showed Friday.

Portugal, which received a 78 billion euros ($105.6 billion) bailout from the European Union and International Monetary Fund in May, has projected a deficit of 5.9 percent of GDP by the end of 2011 as it seeks to put its public finances in order.

The figures from the national statistics agency were not “as promising as we had hoped,” Prime Minister Pedro Passos Coelho said in Poland late Thursday where he was attending an EU summit.

Coelho, in power since June, said budget targets for this year remained unchanged despite the disappointing outcome as Portugal tries to work its way down to the EU deficit limit of 3.0 percent.

“The measures announced during the last review by the troika (auditors from the EU, IMF and European Central Bank) will allow us to achieve the deficit forecast for this year,” he said.

The government recently introduced higher income and sales taxes to cover an unexpected hole of two billion euros in its finances.

The national statistics agency said the public deficit fell to 6.9 billion euros in the first half of 2011 from 8.7 billion euros in the same period last year.

The fall came largely from a 2.7 percent cut in public expenditure including lower to civil servant salaries and reduced social services.