Portugal braced for deeper cuts and tax rises from 2013 budget

City A.M. Reporter
PORTUGAL’S centre-right government yesterday announced sweeping tax rises and spending cuts in its 2013 budget, which promises a third year of recession and hardship under the strict terms of a €78bn (£62.8bn) bailout.

Finance minister Vitor Gaspar warned that failure to continue on the path of austerity could be catastrophic, as about 2,000 protesters gathered outside parliament to demand the resignation of the government.

The budget includes the toughest tax hikes yet under the country’s bailout programme, which will amount to up to three months’ wages for middle-income workers. It has ignited the greatest outpouring of anger so far in Portugal’s economic crisis, but Gaspar remained resolute.

“The margin of manoeuvre for unilateral decisions is non-existent. A rejection of the 2013 budget would mean a rejection of the bailout programme,” he said.

However some economists say the measures, including pension cuts, a financial transaction tax and higher property taxes, could push Portugal into a recessive spiral like Greece.