Portugal’s foreign lenders who granted the country a 78 billion euro bailout last year have agreed to ease their budget targets as Portugal slides deeper into recession.
The ‘troika’ of inspectors, – the European Commission, the European Central Bank and the International Monetary Fund – has upwardly revised this year’s government deficit goal from 4.5 per cent of GDP to 5 per cent.
It gives Portugal a breathing space although by 2013 the target will now be a harsh 2.5 per cent. Even so the government is playing up the positive.
“The possibility to change the quantitative limits of the programme derives from the credibility and trust established with our international partners, after four regular exams,” said Portugal’s Finance Minister, Vitor Gaspar.
That trust is based on the government readying new austerity measures for next year. Last Friday it announced that social security contributions by private sector workers will be raised from 11 per cent to 18 amounting to employees losing a month’s pay.
With the recession biting hard it is difficult to see when the measures will bear fruit.