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.
Summit is expected to provide member states with opportunity to consult, exchange views on the most important issues concerning them in the framework of the Gas Exporting Countries Forum
Slowdown in Chinese economy, rising oil stocks in US, and oversupply from OPEC are all factors making price of oil lower
'World is more connected than ever before. More and more developing countries are seeking to join global trade networks,' WTO director-general says
European Central Bank is ready to use ‘all instruments available’ to stimulate the eurozone economy, Draghi says
Kazakhstan has overtaken Australia as the lead supplier of uranium for US reactors.
Depreciation of emerging market currencies, combined with low commodities prices, have made investors around the globe nervous
Global growth at further risk from Chinese asset price deflation, and US interest rate increases, Moody's says
Traders fear Chinese government will withdraw support measures markets
European Commission president 'convinced' three-year plan will boost investment in EU
Deal aims to bolster fight against tax fraud through exchange of financial information on Turks holding accounts in US and vice versa
Vessels were delivered to port of Alexandria on June 17
The economic cost of violence according to the 2015 Global Peace Index has reached a staggering $14.3 trillion with Syria the least peaceful country.
The leading opposition lawmaker has said that Turkish President Erdogan is open to all possiblities for a coalition.
Qatar has filed a lawsuit against the leader of the National Front in France for his comments regarding "terror" activities.
Saudi Arabia will put in place an electronic bracelet system for all pilgrims visiting the country to perform their Hajj duties.
After U.S. Federal Reserve Chair Janet Yellen indicated that the central bank was poised to raise interest rates, European stock markets fall.