Portugal’s parliament approves austerity budget

| November 4, 2010
Portugal’s parliament approves austerity budget

Portugal’s parliament yesterday endorsed tough austerity measures – designed to deal with the country’s spiralling budget deficit.

Many euro zone nations have introduced similar measures as they tackle large levels of debt.

The new austerity budget is aimed at trimming the deficit from 7.3% of economic output in 2010 to 4.6% in 2011.

However, the measures have caused political tension and the country’s Prime Minister, Jose Socrates, had threatened to resign if the budget was not passed.

The measures have not been gratefully received, which will see cuts to public spending and tax hikes.

Confidence in Portugal’s economy was dented over the summer months, during the euro zone debt crisis.

In July, credit rating agency Moody’s Investor Service cut Portugal’s debt rating by two notches.

Moody’s downgraded Portugal’s rating by two notches to A1, citing weak growth and suggesting it may need fresh austerity measures next year to reach fiscal targets.

Meanwhile, the Prime Minister said the measures were not taken with “a light heart” and they are expected to hamper growth and will tip the unemployment rate above the 10% mark.

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