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Portugal recession 'will last two years' | Portugal recession 'will last two years' |
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Portugal will sink into recession this year and next due to the terms of its 78bn euro ($116bn; £70bn) rescue deal, its finance minister has said. | Portugal will sink into recession this year and next due to the terms of its 78bn euro ($116bn; £70bn) rescue deal, its finance minister has said. |
Fernando Teixeira dos Santos said austerity measures required as a condition of the funds would see the economy shrink by 2% in 2011 and 2012. | Fernando Teixeira dos Santos said austerity measures required as a condition of the funds would see the economy shrink by 2% in 2011 and 2012. |
Tax rises and spending cuts will form part of a major economic restructuring. | |
The head of the European mission said the terms of the bail-out were "tough" but "necessary and fair". | |
Under the deal there will be an additional programme of privatisations, and pensions exceeding 1,500 euros will be cut. The sales tax on some products will rise. | |
The aim is to cut Portugal's deficit of 9.1% - three times the eurozone's limit - to 3% by 2013. | |
Juergen Kroeger, who led the EC mission, told reporters at a press conference in Lisbon that 52bn euros of loans would come from the EU and rest from the IMF. | |
But as part of the deal Portugal had to tackle imbalances in the economy, and restructuring the banking sector was necessary, he said. | |
He accepted that the changes being demanded were "front-loaded" and would be "painful", but they were needed to address urgent issues. | |
"These are major structural reforms that are aimed at fostering competitiveness," he said. | |
Mr dos Santos accepted that the restructuring would be tough for the Portuguese people, but added: "This is a programme aimed at returning to growth and employment." | |
Other measures to be taken would be changes to labour market laws and social benefits. |