Portugal revises 2010 debt upwards indicating setback

Prime Minister Jose Socrates Portugal has for a second time revised upward the debt-stressed country's budget deficit last year, releasing official figures that said it was 9.1 per cent of gross

domestic product instead of the previously announced 8.6 per cent. The National Statistics Institute said in a statement dated Saturday it had sent the revision to Eurostat, the EU's statistics office.
The revised deficit figures are another setback to Portugal's economy as its government negotiates the terms of a badly needed bailout to try to avoid bankruptcy.

Portugal requested the bailout this month as it struggled with high debt after years of poor economic growth and amid forecasts of faltering output. Delegations from the European Commission, the European Central Bank and the IMF were in Lisbon last week to start negotiations on the terms of the rescue. The bailout could amount to €80 billion (Dh428 billion) and the parties must fix the final amount and determine the interest rate.

In late March, the 2010 deficit was recalculated at 8.6 per cent after the institute was required by the EU to adopt Eurostat auditing rules which forced the integration of losses not properly accounted for previously. The deficit figure is far above the 17-nation Eurozone's limit of 3 per cent. Portugal is one of the bloc's smaller members, accounting for less than 2 per cent of its overall gross domestic product.
The revised deficit misses by a long way the 7.3 per cent target set by Prime Minister Jose Socrates' government for 2010.

Analysts expect a succession of austerity plans featuring tax hikes and pay cuts to push Portugal into recession this year, reducing tax revenue and placing greater stress on a budget already fast draining through the payment of high interest rates on borrowings. A further budgetary burden is likely to develop if the jobless rate rises beyond 11 per cent, placing greater pressure on the treasury through the resulting increase in welfare payments.

From : Gulf News