Portugal to hit deficit target, says official

The Portuguese government has met its target of reducing the public deficit to 7.3 percent of GDP last year from 9.3 percent in 2009, the secretary of state for the budget, Emanuel dos Santos, said Thursday.

"We can guarantee that the target of 7.3 percent was reached," Dos Santos told a news conference in Lisbon. "All indications we have point in this direction." He said the final figure would be released in February.

The government has embarked on a draconic austerity drive, cutting public sector wages and increasing the valued-added tax rate in an effort to reduce the shortfall in its books further to 4.6 percent of GDP this year.

The news failed to prevent the yield on the 10-year Portuguese government bond moving back over 7 percent for the first time since November as investors continued to question the government's ability to service its debt.

The debt-management agency IGCP announced Thursday it would hold tenders for four- and 10-year government bonds on January 12, the first bond auctions of the year. The Treasury is looking to place between 750 and 1.25 billion in bonds. The tenders are seen as a the first key test of whether the government can stave off the fate of Greece and Ireland, which sought external help to help sort out its financial difficulties.

At an auction of six-month bills earlier this week the IGCP was obliged to raise the average yield to 3.686 percent from 2.045 percent at the last auction of paper with the same maturity held in September of last year. The rate was six times the 0.592 percent offered at the first six-bill tender in 2010.