Brussels, 10/09/2012 (Agence Europe) - Simon O'Connor, a spokesman for Commissioner Olli Rehn, refused to comment on Monday 10 September about theories that Portugal will not meet its budget targets, and would not say whether the new austerity measures announced last week by the Portuguese Prime Minister, Pedro Passos Coelho, had been influenced by the troika fact-finders from the European Commission, European Central Bank and International Monetary Fund, currently working in Portugal. O'Connor would not say whether the Commission still believed that the target of reducing debt to 4.5% of GDP in 2012 could be achieved.
On television on Friday 7 September, Passos Coelho announced new austerity measures for 2013, such as an increase in social security contributions from private and public sector workers. He said the government had decided to increase private sector workers' social security contributions to 18% and reduce private sector employers' contributions to 18%, adding that the government was slashing the cost of staff at a time when Portuguese companies are facing financial problems.
The troika of fact-finders have been in Lisbon since the end of August to assess the country's progress in introducing economic reforms laid down in its €78 billion bailout package. The current fact-finding mission is the fifth since the May 2011 bailout was agreed to between Portugal and its international lenders. The previous four reports were broadly positive, but clouds have been gathering over Portugal in recent weeks, such as lower than expected tax income earlier this year, which may make it difficult to reduce the budget deficit to 4.5% of GDP (the 2012 target, see EUROPE 10682). Last week, a Portuguese parliamentarian who had held meetings with the troika said that it might take a flexible approach and agree to adjustments to the aid programme. The MP, Miguel Frasquilho, said the austerity programme might be adjusted to match changes in the economy. In the second quarter of 2012, the Portuguese economy contracted by 3.3%, with unemployment standing at 16%. (SP/transl.fl)