16 Oct 2012

Protests as Portugal unveils tough budget

3:23 pm on 16 October 2012

The Portuguese government has revealed details of its draft budget for 2013, one of the harshest in the country's recent history.

Finance Minister Vitor Gaspar on Monday confirmed that the average income tax rise would increase from 9.8% in 2012 to 13.2% next year. Portugal was granted a €78 billion euro bailout last year, the BBC reports.

Mr Gaspar said the budget was the only way for the country to meet its targets under the bailout.

"We have no room for manoeuvre. Asking for more time [under the bailout] would lead us to a dictatorship of debt and to failure."

Mr Gaspar also announced spending cuts worth €2.7 billion next year, which would include laying off 2% of the country's 600,000 public sector employees.

About 2000 protesters gathered outside parliament on Monday to demand the resignation of the government, chanting: "The people united will never be defeated."

Mr Gaspar said the budget would allow Portugal to reduce its budget deficit to 4.5% in 2013. It must eventually get its deficit below the European Union target of 3% of gross domestic product.

Portugal is experiencing its worst recession since the 1970s, with the unemployment rate above 15%, and predicted to rise to 16.4% next year.

Opposition Socialist Party leader Antonio Jose Seguro described the draft budget as "a fiscal atomic bomb".

Portugal's main trade union, the CGTP, said it was "an attack on the dignity of the people" and daily newspaper Diario Economico declared it "an insult to the Portuguese people".

As in Spain and Greece, Portugal has seen huge street protests against the austerity cuts that are needed to meet the demands of the bailout.

In September, the government decided not to raise social security contributions next year from 11% to 18% after protests against the proposed move.

A general strike is planned for 14 November.