MercoPress. South Atlantic News Agency

Portugal Joins Euro Belt-Tightening Bandwagon but with Strong Political Support

Prime Minister Jose Socrates

Portugal has become the latest country to introduce austerity measures, after both Greece and Spain took similar steps to stabilize public finances in the face of massive debt.

Portuguese Prime Minister José Sócrates on Thursday announced spending cuts to slash the 2011 target budget deficit to 4.6% of GDP, down from a previous estimate of 5.1%. “These measures are crucial to re-establishing confidence and secure financing for the country,” Sócrates said at a news conference in Lisbon.

The Socialist government plans to raise taxes and cut wages, as well as freeze publicly-financed projects such as the new Lisbon airport.

Last week, Lisbon pledged to reduce this year's budget deficit to 7.3% of GDP, rather than 8.3% originally proposed. Last year, Portugal's deficit was a record. 9.4%. Under the EU Stability and Growth Pact—which is meant to safeguard the Euro—Eurozone members are required to keep public deficits under 3% of its GDP.

In Spain, trade unions announced a general strike after Spanish Prime Minister José Luis Rodríguez Zapatero on Wednesday revealed austerity measures that would cut wages for public workers and for pensioners.

However, differently to its neighbour, the Lisbon plan has been agreed with the main conservative opposition party which in Portugal is identified as Social Democrat Party. PM Sócrates and Pedro Passos Coelho met for almost two in Sao Bento palace before the announcements were made official following the cabinet meeting.