Portugal signals EU-IMF agreement

The Portuguese government is signalling that it has reached an agreement with IMF and EU creditors on its latest radical austerity measures to correct public finances, after the constitutional court struck down some of the proposed policies.

In saying late on Sunday that it had satisfied the conditions of the International Monetary Fund and European Union, Portugal sent a message that it is able to pass the seventh audit of its accounts and reforms by auditors from the IMF, European Commission and European Central Bank.

That would open the way for the release of the latest instalment of bailout funding of 2.0 billion euros ($2.6 billion) under the rescue programme of 78 billion euros agreed for Lisbon in May 2011.

Portugal hopes that in turn this will enable its EU partners to soon confirm their agreement in principle to grant Portugal an extension of the delay for repayment of the rescue loans.

The government issued a brief statement after a cabinet meeting which said: “The cabinet met to be informed of the conclusion of the seventh evaluation and to confirm the conditions needed to conclude it.”

But Prime Minister Pedro Passos Coelho’s belt-tightening measures has not only met resistance with the general public, but also within his coalition government where some ministers have criticised certain plans to cut spending.

A statement from President Anibal Cavaco Silva’s office said later Monday that the country’s Council of State, an advisory body that represents a wide political spectrum, would be summoned next week.

In a brief statement, it said the 21-member advisory body would study “the perspectives of the Portuguese economy for the post-troika period”.

The president has previously stressed the importance of political consensus.

In Brussels meanwhile Portuguese Finance Minister Vitor Gaspar was set to present the results of the troika’s audit to his counterparts in the eurozone.

The latest audit began at the end of February but lasted longer and was more difficult than the previous audits. This was mainly because at the beginning of April, the constitutional court rejected several of the measures in the national budget for this year which included unprecedented tax increases.

Consequently, Coelho put forward measures intended to enable Portugal to respect its commitment to reduce its budget deficit to 5.5 percent of gross domestic product at the end of this year, to 4.0 percent next year and to below the EU ceiling of 3.0 percent in 2015.

These include the shedding of 30,000 civil servant jobs out of a total of 700,000, an extension of working hours for civil servants from 35 to 40 hours per week and a delay in the age qualifying for a full pension from 65 to 66 years.