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Portugal public deficit down sharply, beats target

Bailed-out Portugal cut its public deficit sharply last year, beating the target laid down by its EU and International Monetary Fund rescue partners through an exceptional fund transfer, official figures showed Friday.

The 2011 public deficit — the shortfall between government revenues and spending — was equal to 4.2 percent of Gross Domestic Product, below the 5.9 percent EU-IMF target and compared with 9.8 percent in 2010.

The national statistics service INE said however that the improved outcome reflected an extraordinary transfer of private pension funds to the public sector, which had been approved by the EU and IMF.

The transfer worth some 6.0 billion euros was equivalent to about 3.5 percent of GDP, INE said, which would give an unadjusted deficit of around 7.7 percent of GDP.

Lisbon has slashed spending and raised taxes in return for a 78-billion-euro ($104 billion) rescue package from the EU and IMF agreed in May 2011.

Portugal’s economy shrank by 1.6 percent last year under the impact of the fiscal retrenchment and the country’s central bank now forecasts the economy will shrink 3.4 percent this year as the government continues to implement austerity measures.

Lisbon is committed to a public deficit of 4.5 percent of GDP this year, falling to the EU ceiling of 3.0 percent en 2013.