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Portugal votes for new 2014 budget cuts

Published on 24/01/2014

Lawmakers in bailed-out Portugal voted in favour of new budget cuts for 2014 on Friday to make up for previous money-saving measures that had been struck down by the Constitutional Court.

The amended 2014 budget aims to keep Portugal’s deficit-cutting programme on track as the nation prepares to exit a 78-billion-euro bailout programme on May 17, less than three years after it was thrown the international lifeline.

The Portuguese parliament passed the new version of the 2014 budget in a preliminary debate, or first reading. It must be still approved in a second reading, for which a date has yet to be set, before being formally adopted.

The new legislation is designed to keep Portugal on target to curb its public deficit to the equivalent of 4.0 percent of gross domestic product in 2014 by expanding the base of an existing “solidarity” tax on retirements and by increasing health insurance contributions from government workers.

The new measures compensate for a decision of the Constitutional Court, which on December 19 struck down a planned 10-percent cut in public workers’ pensions above 600 euros a month.

The government announced Thursday that the public deficit in 2013 would amount to about five percent of gross domestic product, well below the 5.5-percent target set by Portugal’s international bailout creditors.