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.
The conflict between Turkish and Greek Cypriots on the island continues over the ownership of the hydrocarbon reserves in the exclusive economic zones off the shore of the island
Aeroplane maker company Boeing sells plane parts to Iran, as part of easing the sanctions and first step since 1979
OPEC's second-largest producer, Iran is normally among the first members of the oil producers' group to call for supply cuts to support prices.
The 21-member Asia-Pacific Economic Cooperation (APEC) bloc said they would advance structural reforms to unleash new sources of growth.
Ukraine needs to pay its previous debt to Russia by the end of the year and pay in advance for getting new volumes of natural gas
The loss of Khafji's 280,000 barrels per day of Arabian Heavy crude will be felt more in Kuwait, which has far less spare output than its neighbour
Under Lufthansa's proposals, pilots would still be able to retire early, but the age would gradually increase to 60 from 55.
Labor tension on the rise as high inflation reduces spending power.
Third quarter growth was lowest in more than five years, threatening annual target
De Margerie was killed when a business jet collided with a snow plough during takeoff at Moscow's Vnukovo International Airport overnight, the company and airport officials said.
Stabilised political and security situation, the launch of government initiatives toward fiscal consolidation and strong support from external donors are some of the reasons given for improved economic outlook.
Norway will not supply gas to Europe in case of supplies being cut by Russia, says Norwegian Energy Minister Lien
A fall in global oil prices, down more than 20 percent from this year's June high, means that ending costly diesel subsidies will save the government money without hurting consumers.
EU officials said the gas talks would continue in Brussels next week, with Poroshenko telling reporters that the financing still needed to be resolved.
The food-producing regions of Guinea, Sierra Leone and Liberia in West Africa have been severely affected by the worst outbreak on record of the viral haemorrhagic fever