Portugal hit by harsh new austerity measures

Portugal has been hit by a new round of harsh austerity measures. The Portuguese government announced large tax hikes and spending cuts in its 2013 budget, just two days after mass protests. Portugal was bracing for further street protests on Monday as the government confirmed it would continue its course of austerity in its 2013 budget. The new measures are believed to be the toughest cutbacks introduced in Portugal since the nation was granted a conditional EU-IMF bailout worth some 78 billion euros ($100 billion). "The proposed budget is the only one possible ... we don't have any room for maneuver," Finance Minister Vitor Gaspar told journalists after submitting the budget bill to lawmakers. As expected the 2013 budget targets income tax, pensions and unemployment and sickness benefits. Gaspar confirmed that the average tax rate would rise from 9.8 percent this year to 13.2 percent, conceding that "increase in the tax burden is very significant." He warned, however, that under the country's bailout program, "calling into question the budget will call into question [financial] aid." Speculation over the details of Monday's budget and fatigue over existing measures prompted tens of thousands of people to take to the streets in cities around Portugal on Saturday. It was one of a growing number of demonstrations and strikes to have hit Portugal over the last month. But Portugal's commitment to austerity has not gone unnoticed. The so-called troika - consisting of the European Union, International Monetary Fund and European Central Bank - has agreed to ease Portugal's targets for reducing the public deficit in recognition of its efforts. Nevertheless Portugal's Prime Minister Pedro Passos Coelho is obligated to achieve a deficit of 5 percent of gross domestic product this year and 4.5 percent in 2013.