(Updates with plans to raise value-added tax rates on some goods in third paragraph.)
June 28 (Bloomberg) -- Portugal’s new government said it plans to sell its holdings in electricity company EDP-Energias de Portugal SA and power-grid operator REN-Redes Energeticas Nacionais SA “preferably” by the end of 2011.
The government of Prime Minister Pedro Passos Coelho, sworn in last week, will have to implement an austerity plan that was a condition of the 78 billion-euro ($112 billion) financial aid package from the European Union and the International Monetary Fund. With the country’s debt and borrowing costs surging, Portugal followed Greece and Ireland in April in seeking a bailout.
The central government will reduce the number of employees by 1 percent a year, with local and regional governments’ workforces shrinking twice as fast, the government said in its program, posted today on its website. The previous government froze public-sector workers’ salaries through 2013 and cut pensions of more than 1,500 euros a month,
Tax deductions will be limited and the value-added tax rates of some goods and services will be raised. The government plans to cut companies’ social-security payments and reduce the tax brackets for individuals and companies. Portugal also agreed to phase out rent control and plans to decide in 90 days which institutes, foundations and state-companies it will merge or close.
The three-year aid plan set goals for a budget deficit of 5.9 percent of gross domestic product this year, 4.5 percent in 2012 and 3 percent in 2013. Portugal had the fourth-biggest gap in the 17-country euro region last year at 9.1 percent of GDP.
The government plans to suspend the high-speed railway project from Lisbon to Madrid, and sell one of the television channels of state-owned broadcaster RTP, and the state’s stake in news agency Lusa. It also plans to sell state-owned airline TAP SGPS SA. The government didn’t set a timetable in the program issued today.
--Editors: Jim Silver, Jeffrey Donovan.
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