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LISBON: Recession-plagued Portugal yesterday won an extra year from its creditors to bring down its public deficit in line with EU regulations, but faces record unemployment and mounting social discontent.
Finance Minister Vitor Gaspar said Portugal, suffering its worst recession in 40 years, will now have until 2015 to bring the deficit below 3.0 percent of gross domestic product (GDP).
“The new deficit limits are 5.5 percent of GDP in 2013, 4.0 percent in 2014, and 2.5 percent in 2015,” Gaspar told a press conference as he presented a quarterly review of reforms agreed to in return for aid from the European Union (EU) and the International Monetary Fund (IMF).
The targets had already been eased in September to 4.5 percent for this year, 2.5 percent in 2014 and two percent in 2015.
Eurozone countries are obliged to run public deficits of no more than three percent of output, and are supposed to work towards a balanced budget, and even a surplus in times of economic growth.
Last year, Portugal’s public deficit came to 4.9 percent of GDP, Gaspar said, taking account of revenues raised through the sale of stakes in Portuguese airports.
But he said some EU authorities would estimate that the deficit stood at 6.6 percent last year, without including the airport sales.
Portugal’s troika of public creditors have given a green light to an eighth payment of emergency aid to the country, which negotiated a rescue package worth ¤78bn ($102bn) in May 2011.
A joint statement issued by the EU, IMF and European Central Bank said that implementation of a Portuguese reform programme “remains broadly on track, against the background of difficult economic conditions.
“The end-2012 fiscal deficit target was met, financial sector stability has been safeguarded, and a wide range of structural reforms is progressing,” it added.
Talks between the troika and Portuguese officials lasted two weeks however, the longest period so far for payment approval, suggesting that the creditors had closely scrutinised Portugal’s accounts.