Portugal is determined to meet the terms of its bailout and return to bond markets next year, Prime Minister Pedro Passos Coelho said after a European Union summit.
“I see no reason for us to drop the idea of being successful in the execution of our program and return to markets in September of 2013,” he said in Brussels today. The EU (BKIR) and International Monetary Fund will step in to help if “external factors” block the return to markets, he said.
The premier’s government is cutting spending and raising taxes to meet the terms of the 78 billion-euro ($105 billion) aid plan. Portugal should achieve its 2012 deficit target based on current forecasts, the IMF said in a joint statement with the European Commission and European Central Bank on Feb 28.
Asked if Portugal would seek a more flexible aid program due to a bigger-than-expected recession in the southern European country this year, Passos Coelho replied: “If we did that, all our current sacrifices would be in vain.”
“The only way for us to get out of the current situation is to correct the deficit,” said Passos Coelho.
Portugal narrowed the shortfall to about 4 percent of gross domestic product in 2011 from 9.8 percent in 2010 after the transfer of banks’ pension funds to the state. The government has forecast a gap of 4.5 percent in 2012 and that it will reach the EU ceiling of 3 percent in 2013.
The debt-to-GDP ratio is projected to “stabilize” at 112 percent in 2013 after reaching 111 percent in 2012, the commission forecast in November. Debt was 93.3 percent in 2010.
“We know that 2012 will be a very difficult year of adjustment,” said Passos Coelho. “The government is committed to carrying out all the reforms that will enable Portugal to return to a growth trajectory in 2013.”
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