15 Apr 2010

Portugal warned to cut debt

7:58 am on 15 April 2010

The European Commission has warned Portugal may need to take additional steps to cut its budget deficit if economic conditions worsen.

European Commissioner for Economic Policy Olli Rehn said Portugal's planned budget cuts were "ambitious", but may have to be extended this year.

Last month, Portugal passed an austerity budget including public sector wage freezes and pension cuts.

However, the BBC reports there are doubts about whether the budget goes far enough.

The budget aims to cut Portugal's public deficit slightly to 8.3% in 2010. The government says it then wants to return to below the European Union threshold of 3% by 2013.

Two weeks after the budget was passed, credit ratings agency Fitch downgraded Portugal's credit rating from AA to AA- over concerns about its high levels of debt.

Investors are concerned about debt levels in many European countries.

Greece in particular has been struggling to convince markets it can cope with high levels of debt.