Portugal braced for tough budget
Monday, 15 October 2012 16:29
Portugal braced for tough budgetAcceptance of austerity measures has turned to anger

The Portuguese government will present its budget for 2013 later, which is expected to include sharp tax rises.

More public sector spending cuts are also likely, as protesters plan to march on parliament to demand the resignation of the government and an end to austerity.

Portugal is currently experiencing its worst recession since the 1970s, with the unemployment rate above 15%.

The country was granted a 78bn-euro ($100bn; £63bn) bailout last year

Portugal must get its deficit below the European Union's target of 3% of GDP.

As in Spain and Greece, Portugal has seen huge street protests against the austerity cuts that are needed to meet the demands of the bailout.

After protests in September, the government decided not to raise social security contributions next year from 11% to 18%.

A general strike is planned for 14 November.

'More unrest'

The budget is set to include income tax rises that could amount to two or three months' wages for middle-income workers.

Kathleen Brooks, from currency traders Forex.com, said that the government had to "walk a fine line"

The government expects the economy to shrink by at least 3% this year and by 1% next year, although many economists forecast a greater contraction in 2013.

The unemployment rate is predicted to rise to 16.4% next year.

"The axe could fall very much on tax increases but when you've got 15% unemployment rate you're not going to be able to fill that budget gap with income tax rises alone," said Kathleen Brooks, research director from currency traders Forex.com.

"So we do expect more public sector spending cuts to come and more social unrest as a result.

"With Portugal, the more it cuts, the deeper the recession is likely to be, which actually makes the budget deficit gap much larger."

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source: http://www.bbc.co.uk/news/business-19953167#sa-ns_mchannel=rss&ns_source=PublicRSS20-sa

 

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