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Portugal must make ‘major’ national efforts: IMF, EU

IMF chief Dominique Strauss-Kahn and EU Economy Commissioner Olli Rehn warned on Thursday that the Portuguese people must deliver “truly national” and “major” reform efforts in exchange for a 78-billion-euro bailout.

As Portuguese finance minister Fernando Teixeira dos Santos announced agreement with the EU and IMF in Lisbon for a debt rescue worth 78 billion euros ($116 billion), Strauss-Kahn and Rehn stressed in a joint statement issued in Brussels that the success of a “socially-balanced” programme “will require a truly national effort.”

“We recognise that this programme will require major efforts from the Portuguese people,” they added of what they termed a “defining moment” for the country, the third eurozone nation to need emergency international financial help.

Measures to rein in Lisbon’s public deficit will see pensions hacked back, health spending slashed, sales taxes rise, laws protecting workers ripped up and unemployment benefit stripped down alongside a raft of sell-offs for valuable national assets.

“We strongly support the authorities’ intention to protect the most vulnerable groups and to ensuring that (the programme) is implemented in a socially balanced way,” said Rehn and Strauss-Kahn, tipped to run for the French presidency next year on a Socialist ticket.

“One of the goals of the substantial external support being provided is to help reduce the social costs of the economic changes that are needed to build a better future for the country,” they said.

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.

Alongside the above measures, a fund will be set up to support banks if they need help.

But the programme does not require abolition of a 13th and 14th month of pay for civil servants as many had feared.

There are also measures to help raise competitiveness in the economy, including a cut in charges on employment.