BARRY HATTON
Associated Press
LISBON, Portugal (AP) — Portugal’s government is extending into 2015 the main features of its unpopular austerity program, resisting the temptation to sweeten its policies for an election year as it battles to restore the weakened country’s financial health.
The spending plan for 2015 “acknowledges that the (financial) adjustment process is not yet finished,” Finance Minister Maria Luis Albuquerque said Wednesday as she unveiled the government’s annual state budget. “2015 will be another year of challenges.”
Portugal is still recovering from near-bankruptcy in 2011, when it needed a 78 billion euro ($98 billion) international rescue amid a debt crisis that gripped countries sharing the euro currency. Though one of the eurozone’s smallest economies, Portugal’s return to health is seen as important to maintain investor confidence in the 18-nation bloc.
The government intends to cut its budget deficit to 2.7 percent next year. The deficit has fallen from 10.1 percent in 2010 to an estimated 4 percent this year. That drop was largely thanks to deep cuts in spending and entitlements and steep tax increases, which will mostly remain in place.
Economic growth remains frail at an expected 1.1 percent this year and a forecast 1.5 percent next year. Public debt — still worryingly high at around 133 percent of gross domestic product, the third highest in the 28-nation European Union — is predicted to fall to 123.7 percent.
The unemployment rate is seen falling only slightly next year, to 13.4 percent from the current 14 percent.
Portugal hasn’t been able to match Ireland, another eurozone country that needed a bailout, which drew a line under austerity when it announced an expansive 2015 budget Tuesday. Dublin expects growth of 3.9 percent next year, allowing it to increase government spending.
Yet Portugal’s budget offered improvements for some: corporate tax will drop to 21 percent from 23 percent next year, while most old-age pensioners will be exempt from a special tax of 3.5 percent which is being levied on all income.
The center-left Socialist Party, the main opposition, wants more government spending on measures to propel the economy and create jobs.
The coalition government has enough votes in Parliament to ensure approval of its spending plan.
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