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.
Apple, Microsoft, Alphabet, Cisco and Oracle hold about $504B, approximately one-third of all corporate cash in the United States
The Fund's head says 'corruption has a pernicious effect on the economy'
Exit would cost average monthly salary for each household, Organization for Economic Cooperation and Development says
Firms to see deterioration in credit metrics as low oil prices impact cash flows
OPEC exporters as well as other non-OPEC producers, including Russia, fail to agree on oil output freeze
Moody's has upgraded Argentina's credit rating after a US appeals court ruling this week cleared the way for Buenos Aires to proceed with the biggest debt issue by an emerging market country in 20 years.
Ahead of Doha meeting, OPEC says 'hurdles prevail as oversupply persists and inventories remain high'
Kuwaiti OPEC head says Russia and OPEC are likely to agree on oil output freeze
'The good news is that the recovery continues; we have growth; we are not in crisis,' Christine Lagarde says
The meeting is a 'follow-up' to last month's talks between Qatar, Russia, Saudi Arabia and Venezuela when they proposed an accord to freeze oil output at January levels
'They are not trimming output, only keeping it at the same levels...this is the same unchanged policy,' one expert says
Iran joining Venezuela, Saudi Arabia, Qatar and Russia in freezing oil output levels
According to the ratings agency Moody’s, Iran is fiscally and structurally well placed to come back into the global economic scene
PM Davutoglu meets the heads of the world's largest companies as he promotes Turkish economic interests at World Economic Forum
Fund cuts global growth forecasts for both 2016 and 2017 by 0.2 percentage points
'Runaway inequality has created a world where 62 people own as much wealth as the poorest half of the world’s population'