Bloomberg News

Portugal Says It Will ‘Definitely’ Meet 2011 Deficit Limit

December 06, 2011

(Adds deficit targets in third paragraph. For more on the euro-area crisis, click on EXT4 <GO>.)

Dec. 5 (Bloomberg) -- Portugal will “definitely” meet its budget-deficit limit for this year after including the transfer of banks’ pension funds to the state, Finance Minister Vitor Gaspar said.

“We can be confident the 2012 budget limit will be met as well,” Gaspar said today at a presentation in London.

The government aims to trim the budget deficit from 9.8 percent of gross domestic product in 2010 to 5.9 percent in 2011, 4.5 percent in 2012, and to the European Union ceiling of 3 percent in 2013. The Portuguese government said on Dec. 2 the value of the planned transfer of banks’ pension funds may reach 6 billion euros ($8.1 billion).

Prime Minister Pedro Passos Coelho is cutting spending and raising taxes to meet the terms of a 78 billion-euro aid plan from the EU and the International Monetary Fund. Portugal, which followed Greece and Ireland in seeking a bailout, aims to return to bond markets at the end of 2013, Gaspar said.

Jornal de Negocios reported today that the government may narrow its budget deficit to about 4 percent of GDP this year after including the transfer of the banks’ pension funds.

Passos Coelho said in comments broadcast by television station SIC today that the transfer “will allow our deficit to be substantially below 5.9 percent.”

The 2012 budget includes a plan to eliminate the summer and Christmas salary payments for state workers earning more than 1,100 euros a month. Tax deductions will be reduced and the government plans to increase the value-added tax rate on some goods. Spending cuts in 2012 represent 4.4 percent of GDP, including reductions on health-care spending, while revenue increases represent 1.7 percent of GDP.

--With assistance from Henrique Almeida in Lisbon. Editors: Fergal O’Brien, Andrew Atkinson

To contact the reporters on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net; Joao Lima in Lisbon at jlima1@bloomberg.net.

To contact the editor responsible for this story: Tim Quinson at tquinson@bloomberg.net.


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