Portugal presenteert plannen om budgettekort terug te brengen (en)

The Portuguese prime minister José Sócrates announced on Wednesday (25 May) in the parliament a package of austerity measures aimed at axing 0.63 per cent of the country's 6.83 per cent deficit by the end of the year.

Such a reduction means the government plans to have a deficit of 6.2 per cent of GDP by the end of 2005, saving between 830 and 956 million euro, according to Jornal de Notícias.

"We are in the middle of the year and we have in our State Budget a set of expenses that were already made", he said, quoted in Público. Such a reduction "is a pretty ambitious initiative", he added.

The package of measures include a VAT increase from the current 19 per cent level to 21 per cent, as well as an increase of 2.5 cents per litre on gasoline tax and a 15 per cent increase in current tobacco taxes, "effective immediately", he said.

Personal income taxes for those with annual revenues over 60,000 euro will also be raised under Mr Sócrates' plan.

Such measures are in direct contradiction to Mr Sócrates' electoral pledge not to raise taxes, but are needed as the public deficit was found to be much higher than previously thought, a Socialist spokesman said.

If the deficit was 5.1 per cent, as forecast by the Portuguese Bank in January, "it would have been possible to avoid a tax increase", Mr Sócrates said. It was the "surprise" value of 6.83 per cent that made him break his promise, he added.

The sky-high deficit figure was announced by the government on Monday (23 May) following the presentation of an independent report on the state of the country's finances to the Portuguese prime minister.

Further measures to clamp down on corporate tax evasion and on reducing the size of the state's administration, as proposed by leading economists, were not specified but public workers will have fewer benefits under the plan.

Another measure proposed by Mr Sócrates is to gradually raise the retirement age for civil servants, who number over 700,000 from 60 to 65, starting in 2006.

The parliament, which is controlled by Mr Sócrates' Socialist Party, is set to vote on the plan in June.

The deficit, which refers to the time of the Socialist party's election (March 2005), is the highest official public deficit currently in the 12-nation eurozone.

The European Commission has made clear that the procedure on excessive deficit against the Portuguese State will only be activated following the presentation of the new Portuguese Stability and Growth Program, set to take place "by the end of the month", according to a spokesperson.

Portugal was the first euro zone member state to cross the EU deficit red line in 2001, pushing a deficit of 4.4 per cent of GDP. Governments in the following years managed to keep the numbers within the limits, through a mix of asset sales and more conventional austerity measures.