Portugal cuts deep into public sector deficit

Portugal reduced its public sector deficit by 47 percent, or 3.22 billion euros, during the first half of the year, the Portuguese Finance Ministry said late Monday.

Revenue was also up 13.2 percent, some 19.85 billion euros, buoyed by a one-off cash windfall of 2.69 billion euros from the transfer of pension funds from banks to the government.

Spending was also down 2.2 percent during the first six months of the year, the ministry said. Part of the reason the Portuguese government was able to cut spending was the cancelation of public employees’ vacation pay, which is normally paid out in June. The suspension of the summer pay was part of the harsh austerity package imposed by Brussels following the country’s 78-billion-euro bailout last year.

In a televised speech on Monday night, Portuguese Prime Minister Pedro Passos Coelho pledged to carry on with the austerity measures, saying that he would prefer to lose at the ballot box rather than abandon his policies of sticking to the terms of the EU-IMF rescue.

The path we are following is not right or wrong; it is the only possible path”

“The path we are following now is not right or wrong; it is the only possible path,” he told members of his center-right Social Democratic Party at an event marking the start of parliament’s summer recess.

“If one day we have to lose elections in Portugal in order to save the country, then, as they say: the hell with the elections,” he told the party meeting.

General elections are not due for another three years and Passos Coelho’s party still leads in the opinion polls. Published in mid-July, a survey by Eurosondagem showed that the Social Democratic Party had about 45-percent support while the main opposition Socialists had 32.5 percent.

The government has won praise from Brussels and the International Monetary Fund for sticking to the terms of the bailout deal amid a worsening European economic outlook and the euro-zone debt crisis.

Many economists say recession-hit Portugal is likely to need more rescue funds before it can finance itself in the capital markets, but the government has insisted it will not ask for more money or time to meet fiscal targets.

In another issue, a new study released on Tuesday showed that Portugal ranked the highest among 20 EU nations for giving the most generous tax breaks for companies to invest in research and development. The study published by the Washington think-tank Information Technology and Innovation Foundation showed that Portugal also ranked second behind India among the 42 advanced and emerging economies for R&D tax breaks. Spain also ranked in the top 10.