World Bulletin / News Desk
Bracing for street protests around the Lisbon parliament that will greet a tax-grabbing 2013 budget, Portugal's prime minister vowed on Monday to stay the course of austerity despite political damage it is doing to his party.
After his Socialist opponents swept a regional election at the weekend, conservative Pedro Passos Coelho said he would not flinch from a strategy that is hailed as exemplary by EU leaders who bailed Portugal out last year but has strained the patience of voters who took to the streets in frustration last month.
"Despite the bad moments the party is going through in national terms, regional elections will certainly not compromise the national strategy," Passos Coelho said after his Social Democrats trailed badly in Sunday's voting in the Azores.
The budget, to be presented in parliament from around 6 p.m. (1700 GMT), will outline the harshest measures yet since the 78-billion-euro ($100-billion) EU/IMF bailout. Police expect a big protest outside as many Portuguese demonstrate that their stoic acceptance of austerity, once much admired, has turned to anger.
With the country suffering its worst recession since the 1970s, the 2013 budget is set to introduce sharp income tax hikes, which could amount to up to two or three months' wages for middle-income workers, to ensure the country meets its budget goals under the bailout. Finance Minister Vitor Gaspar has described the planned tax increases as "enormous".
Some economists say that the measures, which will also include pension cuts, a financial transaction tax and higher property taxes, could push Portugal into a recessive spiral like Greece, further undermining Europe's German-inspired austerity drive for the euro's highly indebted countries.
The government has argued that following EU fiscal discipline will better serve the long term interests of Portugal as it faces some of its most testing days since it emerged from decades of right-wing dictatorship 38 years ago.
The budget comes after the government announced last month a rise in social security contributions, which it subsequently dropped after mass protests erupted. Opposition to the alternative tax measures is set to be equally strong.
Even the conservative president, Anibal Cavaco Silva, criticised the budget measures. "In the current circumstances, it is not correct to demand of a country being subjected to a budget adjustment process that it meets the targets at any cost," Cavaco Silva wrote on his Facebook page.
Before September, Portugal had shown a relatively high level of political consensus and support for cutting costs and for the bailout it sought in 2011. But that support has been eroded, with the Socialists now pledging to vote against the budget when it is put to parliament at the end of the month.
Protests have now become frequent, though still peaceful. A general strike is planned for Nov. 14.
LAST MINUTE DEBATE
Passos Coelho's Social Democrats hold a comfortable majority in parliament together with their rightist ally the CDS. But the CDS has a long history of opposing higher taxes and analysts say the party's complete support of the government can no longer be taken for granted, especially if the economy weakens further.
In recent national opinion polls, the ruling party has dropped to record lows since the last election in June 2011.
The government spent the weekend locked in an internal debate on the possibility of finding more areas for spending cuts in order to ease the tax hikes, according to local media. The cabinet was still holding meetings on Monday.
Diario Economico business newspaper said on Monday the budget would include measures to help the economy like a recapitalisation fund for small and medium-sized companies. These would also be allowed to defer value-added tax payments until after they had booked receipts from customers - measure that should boost cash flow and ease their debts.
The economy is expected to contract by at least 3 percent this year and the government expects a contraction of 1 percent in 2013. Many economists say the 2013 shrinkage will be greater. Unemployment is already at record highs above 15 percent and the government expects it to rise to 16.4 percent next year.
The 2013 draft budget may include new economic forecasts for next year. This year's budget performance was undermined by tax revenues falling short of expectations as the recession deepened and unemployment rose beyond government forecasts.
Russia has overcome a "psychological barrier" and is ready to deepen its economic ties with China, Deputy Prime MinisterArkady Dvorkovich said
With Chancellor Angela Merkel's right-left coalition plus the opposition Greens, it was the biggest majority for any euro zone rescue package so far in the 631-seat chamber.
The agreement commits Tanzania, Kenya, Uganda, Rwanda and Burundi to cooperate with the United States in customs issues, ease red tape at borders, reduce customs wait times and harmonize trade standards.
Sri Lankan President Maithripala Sirisena has unnerved China with his re-examination of certain projects that Chinahas invested in, including a $1.5 billion "port city" project in Colombo.
EU energy chief Maros Sefcovic invited Russian Energy Minister Alexander Novak and his Ukrainian counterpart Volodymyr Demchyshyn for talks
Gazprom and Ukrainian state energy firm Naftogaz have accused each other of not sticking to agreements on gas supplies.
The new canal, that will allow two-way traffic of larger ships, is supposed to increase revenues by 2023 to $13 billion.
A day after euro zone finance ministers agreed to a four-month extension of a financial rescue, Finance Minister Yanis Varoufakis gave a frank assessment of Greece's financial position.
The agreement is the culmination of talks that began in September after the government decided its own solutions to its fiscal crisis were failing to convince investors.
Energy union highlights bloc's attempt to seek independency from its main gas supplier - Russia.
Merkel's right-left coalition is set to prevail, despite vocal pockets of resistance on the right and left.
Republicans passed the bill to increase pressure on Obama to approve the pipeline, a move the president said would bypass a State Department process that will determine whether the project is in the U.S. national interest.
Turkish PM Davutoglu expresses Turkey's readiness to help in supplying energy to Central Europe.
General Atomics won a $200 million contract in 2013 from the United Arab Emirates for supply of an unspecified number of predator drones, the first such sale in the region
Gazprom said in a statement that Ukraine had 219 million cubic metres (mcm) of gas left that would be used up in two days.
Greece's reform list must be accepted by its EU creditors in order for the indebted country to receive bailout extension.