Thursday, May 5, 2011

Euro Mess: Portugal To Get 116B: Requires Big Sacrifices, Recession; Train, Airport Construction Cuts

The European Union will provide 52 billion euros for the financial aid package to Portugal, while the International Monetary Fund will provide 26 billion euros. In a statement, IMF Managing Director Dominique Strauss-Kahn said the program - which totals 78 billion euros - is ambitious and will require sacrifices from the Portuguese government.

The program will focus on three areas: "restoring the country's competitiveness, ensure a balanced budget trend and stabilize the Portuguese financial sector".

"In the context of a genuine national effort, this program will lead to a stronger and more dynamic economy able to generate growth, jobs and opportunities, "
Srauss-Kahn said in a statement it is important to "safeguard the social safety nets". According to the authority, there is no reduction of public salaries and pensions for people with lower income and assisting the most vulnerable will be guaranteed.

However, the program will lead the economy to a recession of 2% or more in 2011 and 2012. The forecast is contained in the draft agreement and contradicts prime minister Jose Socrates, who had said the plan was more lenient than those signed by Greece and Ireland.

Many Casualties.

Among the measures are the reduction of unemployment insurance benefits, the temporary freezing of the minimum wages, tax reform to reduce the number of charges paid by private initiative and the suspension of participation of the State in Public Partnershipa, as the construction of the new Lisbon airport and the high-speed train between Lisbon and Porto. The civil service will continue to be reduced at a rate of 1% per annum, while the decrease in regional administrations may reach 2%. Meanwhile, the budget of Health will lose 550 million. TAP airline should also be privatized by the end of 2011.

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