Portugal 2012 budget bill sees deep recession

Portugal's recession will deepen next year as the centre-right government adopts severe austerity measures to restore the economy to health under a 78-billion-euro bailout, the draft 2012 budget bill showed on Monday, according to Reuters. The draft budget sees the economy contracting 2.8 percent next year, much more than the decline of around 2 percent envisaged when Portugal agreed on its bailout plan with the European Union and IMF in May. The government presented a series of tough austerity measures as part of the 2012 budget on Friday, including cutting year-end and holiday bonuses for civil servants. Unions have promised a general strike in response. Next year is likely to mark the deepest recession since the country returned to democracy in 1974 after decades of dictatorship and compares with a decline of 1.9 percent this year. "We have reached the moment of truth, we have to take profound measures to ensure budget consolidation," Finance Minister Vitor Gaspar told journalists as he presented the 2012 draft budget. "The situation in Europe and in the euro zone is one of the principal risks to the world economy and Portugal is in the centre of this crisis," The budget document, which the centre-right government presented to parliament on Monday, sees the 2012 budget deficit at 4.5 percent of gross domestic product compared with 5.9 percent this year -- in line with the terms of bailout plan. The budget should be voted in parliament on Nov. 29 but its passage is assured as the centre-right government has a comfortable majority.