Tagged: Austerity budget

Portugal may need to make further cuts, warns EC

BBC NEWS | Wednesday, 14 April 2010 | 12:22 GMT

Portugal may need to take additional steps to cut its budget deficit if economic conditions worsen, the European Commission was warned. European Commissioner for Economic Policy Olli Rehn said Portugal’s planned budget cuts were "ambitious", but may have to be extended this year. Last month, Portugal passed an austerity budget including public sector wage freezes and pension cuts. However, there are some doubts about whether the budget goes far enough.

Credit downgrade

"The Portuguese stability programme is ambitious and complete for the years 2011 to 2013, but additional measures may be needed, especially for this year, if risks to the macroeconomic and fiscal developments materialise," Commissioner Rehn said. The country’s austerity budget aims to cut Portugal’s public deficit very slightly to 8.3% in 2010. The government says it then wants to return to below the European Union threshold of 3% by 2013.   

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Portugal credit rating downgraded over debt concerns

BBC News | Wednesday, 24 March 2010 | 11:31 GMT

Portugal’s credit rating has been downgraded from AA to AA- by leading credit rating agency Fitch over concerns about its high levels of debt. Earlier this month, Portugal passed an austerity budget aimed at cutting its budget deficit. The downgrade heightened concerns about the health of some of Europe’s heavily indebted economies, forcing the euro lower against the dollar and the pound. The euro fell by 1.34 cents, or 1%, against the dollar, to $1.3362. Against the pound, it fell by half a penny to 89.325p. The downgrade also sent major European stock markets into negative territory.

European impact

"A sizeable fiscal shock against a backdrop of relative macroeconomic and structural weaknesses has reduced Portugal’s creditworthiness," Douglas Renwick of Fitch’s said. Although the agency said Portugal’s austerity budget was "credible", it said the government would need "to implement sizeable consolidation measures from next year", as well as reverse stimulus measures this year, in order to get its debt levels under control. The downgrade could mean Portugal has to pay higher yields on government bonds to attract investors, making it more expensive for the country to borrow money – even though other leading ratings agencies may not necessarily follow Fitch’s lead.     

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Portugal passes austerity budget

BBC News | Friday, 12 March 2010 | 23:22 GMT

tough budget Portugal’s parliament has approved an austerity budget aimed at cutting its deficit to the level permitted for countries using the euro currency. The government hopes that by reducing the country’s debt it will also restore investor confidence. Prime Minister Jose Socrates described the vote as a political victory for the country. But trade unions have threatened to strike over plans for a public sector wage freeze and pension cuts. There have been concerns that Portugal could run into the same trouble as Greece, where an enormous budget deficit has unsettled financial markets. "This is the budget the country needs," Mr Socrates said after the vote.

The minority socialist government has portrayed this year’s budget – and a medium-term austerity programme yet to be submitted to parliament – as key to restoring Portugal’s credibility with investors. The budget foresees a cut in Portugal’s public deficit by one basis point to 8.3% in 2010. The government says it wants to return to below the EU-mandated   

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