Brussels, 18/10/2011 (Agence Europe) -The European Commission has praised as courageous the draft budget for next year that was unveiled on Monday by the Portuguese goverment (see EUROPE 10471), saying that it showed the country's strong commitment to meet the targets set out in its structural adjustment programme, explained a spokesman for EU Economic and Monetary Affairs Commissioner Olli Rehn on Tuesday 18 October. The Commission praises the government for its desire to go further than planned in rectifying public finances by cutting spending and increasing tax, along with structural measures like lengthening the working week to help the economy restore some of the competitiveness it has lost over recent years.
The Portugeuse government is working to cut the public deficit from 5.9% in 2011 to 4.5% in 2012. Civil servants will no longer receive double pay at Christmas and in July, nor will pensioners whose monthly income is more than €1,000. Savings of €7.5bn in total will be made, €2bn of it in reduced welfare spending. The government is expecting to collect just under €3bn in extra tax, €2bn of it from increasing VAT to 23% on some products. The Portuguese economy is expected to shrink by 2.8% in 2012 and the country's two biggest trade unions are calling a general strike to protest against the austerity measures.
In a video recorded before the budget plans were unveiled, Rehn welcomed the outcome, but noted risks in terms of being able to meet the deficit reduction targets this year. On Tuesday, Rehn's spokesperson said most of his analysis remained viable, describing 2011 as a very tough year for Portugal due to unforeseen events like the huge hole in Madeira's budget (see EUROPE 10455) and the cost of bailing out a Portuguese bank, regretting the way the 2011 austerity measures focused on the short-term. (MB/transl.fl)